Empirical Test Of Multi-factor Pricing Model In Chinese Market

This paper takes the Chinese stock market as the research object.By analyzing the structure of China's stock market and combining the characteristics of the Chinese market,the trend factor and turnover factor representing the technical trader(noise trader)are added to the original Fama-French three-factor model.It constitutes a new asset pricing model and has been empirically tested in the Chinese market.In the study of factors,it is found that there are obvious economies of scale in the Chinese market,book-to-market ratio effects,trend effects and turnover rate effects.Different from previous studies,this paper finds that the book-to-market ratio effect is also significant.After the Fama-MacBeth regression,the paper finds that the scale factor,book value-to-market ratio factor,trend factor and hand rate factor have a good explanatory power for cross-sectional returns.By regressing different portfolios,it is found that the proposed five-factor model has better overall explanatory power than the three-factor model,and the performance of each factor in the regression results is relatively significant,which can well explain the excess return of the portfolio.In the process of the redundancy factor test,it was found that the intercept value of the book market value ratio factor to the regression of other factors was not significant.However,after the split share structure reform,the factor significantly improved,indicating that the book value ratio factor helps to explain the excess returns of stocks in the Chinese market.Before and after the share-trading reform,the Chinese market has undergone great changes,the market structure has changed significantly,and the market maturity has greatly improved.This paper takes the split share structure reform as the node,and divides the time interval into two periods before the stock reform and after the stock reform,and tests the validity of the model separately.The test results show that the validity of the model after the split share reform is higher than that before the split share structure reform,indicating that the maturity of the Chinese market has increased and become more stable.In the process of validity test,it was also found that the five-factor model was more effective than the three-factor model before and after the full sample period and the split share structure reform.Overall,the five-factor model of the trend factor and turnover factor proposed in this paper can better adapt to the Chinese stock market,and the performance of the model is better than the original three-factor model.This paper also provides a good idea for future research,starting from the characteristics of China's stock market to find suitable pricing factors to improve the explanatory ability of the model.It can be seen from the results of this paper that the share-trading reform has a significant impact on the performance of the model.Therefore,the Chinese stock market is divided into stock reforms before and after research,with the focus of the post-equity reform as the key research interval,which helps domestic asset pricing.The model is better developed.