Research On The Return Rate In China's A Share Market Based On Fama-french Five Factor Model

In the international market,the applicability of the Fama-French five-factor model has been verified.However,the three-factor model is still dominated in the domestic asset pricing field,there are few studies on the profitability effect and investment style effect,there is no consensus on the superiority of the model and the three-factor model,and there is little research on the correlation between the idiosyncratic risk based on the five-factor model and stock returns.All above severely limits the application and promotion of the Fama-French five-factor model in China.Therefore,it is of great practical significance to study the application of the five-factor model in China's securities market.Based on the Fama-French five-factor model,in this paper the average returns performance of stock portfolios in China's A-share market was studied,the ability of the Fama-French five-factor model and the Fama-French three-factor model to explain the average return to the Chinese market is compared,and the correlation between stock returns and the variability of traits based on the Fama-French five-factor model was analyzed.First of all,according to the portfolios' average return of the market value-book market capitalization ratio,market value-China's A-share market profitability and market value-investment ability,China's A share market in the characteristics of average stock returns were studied.Secondly,after the factors were calculated,descriptive statistics,correlation test and redundancy analysis,the validity of the Fama-French five-factor model and the Fama-French three-factor model was tested and compared using the GRS test.Finally,the Fama-French five-factor model was used to calculate the idiosyncratic variability,and the correlations between the equivalence and lag-period idiosyncratic variability and the expected stock returns were studied using the Fama-MacBeth regression method and the panel regression method.The results show that there are scale effects,book-to-market value ratio effects,profitability effects,and investment style-related effect characteristics in the Chinese stock market.In addition to the profitability effect,the effect of other factors in the A-share market in China is similar to that in the US market.The profitability effect is mainly reflected in the portfolios with larger market value.In the smaller market value portfolios,the higher the profitability,the lower the return of stocks.The CMA factors calculated using three calculation methods in China's securities market are redundant factors.The performance of the model are greatly affected by the grouping criteria.The results show that the validities are greatly affected by the grouping criteria.For specific expression,the Fama-French three-factor model outperforms the Fama-French five-factor model in the portfolios in terms of market value-book market capitalization ratio and market value-investment style.In the market-profit portfolios,the Fama-French five-factor model performed better than the Fama-French three-factor model.The stock returns described by the Fama-French five-factor model still have a large idiosyncrasy risk.The main reason of the negative correlation between lagging idiosyncrasy volatility and expected returns is that the distribution of high idiosyncratic volatility in stocks with high returns and low returns is asymmetric.This asymmetry is mainly due to short-selling restrictions.