Structural Changes Of Time-varying Beta Coefficient Of Stock Market In China

As a cornerstone of modern finance,the Capital Asset Pricing Model(CAPM)is widely used to measure the relationship between risk and return in capital markets.It is an important tool for measuring investment risks and seleting investment targets.The Beta coefficient is widely used as an indicator for measuring the systematic risk of securities portfolio in the CAPM model.The improvement of the understanding of the Beta coefficient helps financial institutions to identify systemic risks,and to rational select suitable asset portfolios,which plays an important role in reducing market abnormalities,reducing irrational events and improving market stability.The main focus in this study are the stability and time-varying characteristics of the Beta coefficient of the CSI 300 industry index.The CSI 300 Index is used as the proxy variable of the market return rate,and the 3-month deposit benchmark interest rate is used as the risk-free rate.The OLS estimation,recursive regression and rolling window regression were performed on the single-index model and the Fama-French five-factor model respectively,and the state space model was constructed to test the stability and time-varying characteristics of the Beta coefficient in the Shanghai and Shenzhen A-share industries.The study found that the Fama-French model has better explanatory power than the singlecoefficient model,but the independent variables may be redundant;the trend of the Beta coefficient varies in different industries is different;the Beta coefficient of the cyclical industry is relatively higher and more stable than the non-cyclical industry;the industry's Beta coefficient has time-varying and structural transformation characteristics.According to the results of empirical test,the systematic risk characteristics of the Shanghai and Shenzhen Ashare industry are described.Recommendations were made to government regulators and market participants.