Research On The Applicability Of F-F Three Factors And Extended Model To Risk Premium In China A-share Market

Since China securities market has been established for 27 years,it is developing very rapidly.With the rise of China's international status and the deepening of international economic integration,the factors that can affect investment behavior and stock risk premium are becoming increasingly complex and diversified.Therefore,make the right understanding of the the risk factors that affect the risk premium of stock and stock portfolio and the operation Law of the securities market.Not only can help the investors to avoid the risk rationally,choose the optimal portfolio,but also help the enterprises to play the competitive advantage and improve the supervision efficiency.This paper makes an empirical study on the factors that influence the stock portfolio yield of China's A-share market.We choose the stocks in Zhongzheng 800 index as the research object.We divided thesestocks into two groups according to company size and the book value form small to big,cross group get 25 stock portfolio as testing assets.The traditional F-F three-factor model is an analysis of the effect of market excess return,company scale factor and book market value ratio on the excess return of stock or stock portfolio.In this paper,not only the traditional F-F factor model is tested but also the investor sentiment is studied to determine whether investor sentiment will affect the excess return of stocks.The stock rate of turnover and volume are very intuitive,they can on behalf of investors sentiment if the stock market will go rise or fall.So in this paper,the stock rate of turnover and volume as the proxy variable of investor sentiment.Hence F-F three factor model extension model is put forward,through the multivariate time-series regression and cross-section regression,the relationship between a portfolio of excess yields with and market factors,scale factor,book value factor,turnover rate factor and volume factor has carried on the empirical analysis.In the applicability empirical analysis of stock portfolio yield,China's A-share market share yield shows obvious market effect,scale effect,book market value ratio effect and turnover effect.Compared with The volume effect is not very obvious compared with above four factors.The F-F three-factor model and its extended model not only passed the significance test,but also passed the stability test.After join the turnover rate factor and volume factor,not only the model's overall goodness of fit raised,the original F-F three factor,market factor,scale factor,book value factor to explain stock portfolio excess yield ability also rose.And through Wald test,we also found that the F-F three-factor extension model is more effective than the traditional F-F three-factor model,which is more suitable for China's A-share market.