Corporate Returns And Stock Market Anomalies Under Bm Factor

How to effectively predict future return is of great significance to the development of listed companies.And the stock market anomaly as the key to future returns forecasts are more inestimable.As the two typical stock market anomalies,medium momentum and long term reversal have always been a hot issue in the academic circle.This discussion is even more intense in the U.S.financial markets.As for the prediction of stock market returns,the foreign scholars have done a lot of analysis and discussion.However,because of the particularity of China,the Chinese market has been making a roundabout move in the study of the returns predictability.In response to this situation.In order to predicting future returns effectively and explaining the medium-term momentum and long-term reversal,this article focuses on constructing the MC model through the book-to-market ratio(BM)and return on equity(ROE)of listed companies to study the cross-sectional characteristics of expected returns.At the same time,We get a winner-loser portfolio,depending on difference between the MC model and the CAPM model.Furthermore,heterogeneous interpretation model is obtained.Based on the zero-explanatory of CAPM model,the interpretation model shows some explanatory power and especially has a stronger ability to interpreting mid-term momentum.Subsequent correlation analysis results show that the explanatory power of this model comes mainly from the BM factor.After obtaining the study results above,we set our sights on the earnings forecast of Chinese listed companies based on the MC model and robustness test.Through a large number of empirical tests,we find that the expected return and the expected rate of return are time-varying,and MC model shows a modest predictive ability for the two-year ahead time holding period returns.The correlation slope coefficient between real return and predict return reaches 0.53,indicating that the model still has considerablepredictive ability in the Chinese stock market.Subsequent robustness test results show that the model shows considerable robustness in the face of different sample years and seasonal earnings volatility,Although the model is not robust enough at different roe.This paper shows that ROE and BM are the key factors for the model to predict future earnings and explain the stock market anomaly.The BM factor shows excellent ability to predict the return of Chinese listed companies and explain the American stock market anomaly.Through combining the advantages of MC model and CAPM model.We find a new model to explain mid-term momentum and long-term reversal.To sum up,the MC model has a good prediction effect on expecting listed companies returns in China during the different holding period and shows some ability to interpret the visions.Not only providing some theoretical guidance for the development and management of the listed companies,but also opening up a new way of thinking on explaining the stock market visions.