Exsistence Of Low Beta Anomaly In Chinese Stork Market And Causes Of The Formation

The relation between risk and return in the capital market has always been a problem that scholars at home and abroad pay much attention to.Studying the relationship between the two can not only contribute to capital market theory,but also has important guiding significance for investors in the investment decision-making process.When it comes to the relationship between capital market risk and return,the most widely known theory is Markowitz's capital asset pricing theory and the corresponding model.This theory is regarded as the cornerstone of modern finance,its core idea is that there is a positive correlation between the return and risks of assets.If you want to obtain higher returns,you must assume higher risks.But later,many foreign scholars took the data in the stock market of their countries as the research object and studied the relationship between the two.The results showed that the correlation between stock returns and the variable representing the risk was not a positive correlation,more research results nearly consistent showed that the two were negatively related! That is to say,the lower beta stocks have higher returns,which has attracted widespread attention from scholars in the financial community.At present,studies on the relationship between beta and returns are mostly based on data from foreign stock markets.There is less research on China as an emerging market,and Chinese scholars have more inconsistencies in the research conclusions on the relationship between stock beta and earnings.Therefore,it is particularly important to study the relationship between risk beta and return in Chinese stock market.This article mainly uses the data of Shenzhen A shares from 2000 to 2016(excluding the GEM)to conduct research,and makes reasonable assumptions in the paper:the cash dividends generated by stocks are reinvested.Assuming that in every month,according to the beta of stocks,stocks are divided into five groups,and five identical initial capitals are always invested in the investment portfolio with the corresponding risk,this shows the changes in the returns of different groups over time.After drawing a line chart,it is found that the income of the low beta stock portfolio is much higher than that of the high beta stock portfolio.It is reasonable to speculate that there is a low beta anomaly in the Chinese stock market.Subsequent studies mainly use simple least squares method.The stocks are divided into five groups according to the beta of each stock and the beta of the industry.Making a regression of the resulting data according to the CAPM model,in order to study whether the relationship between stock beta and earnings will change accordingly or not.It is found that the low beta anomaly exists at both the stock and industry levels.Afterwards,two-dimensional groupings will be conducted,individual stock risk and industry risk will be grouped at the same time to obtain 25 investment portfolios.It is found that the low beta anomaly is still established.If stocks are selected at individual stock level,which is more convenient in reducing portfolio risk.Choosing stocks at the industry level to reduce the risk of the unit portfolio will bring higher returns.Because many scholars consider several common factors when studying stock returns,such as market value,price-earnings ratio,and book-to-book ratio.After making regressions,it was found that small-cap stocks,etc,have significantly higher levels of returns.Combining this conclusion with the hypothetical low-beta anomaly,investing can bring higher excess returns.Then I will tentatively explain the excess returns in three ways:the five-factor model,the model constructed after adding the turnover rate to the CAPM model,and the effect of considering the merger and reorganization of shares on the low beta anomaly.It is found that the five-factor model could not explain the excess return very well in the Chinese stock market,and the turnover rate,that is,heterogeneous beliefs can better explain excess returns,and the merger and reorganization factor is also one of the reasons for the low beta anomaly in the Chinese stock market.