Research On Pricing Factors Of Chinese Stock Market

Since the fama-french three-factor model was proposed,it has been widely verified and used to explain the difference in return rate and stock selection.However,the three-factor model is not perfect,and there are still many market anomalies that cannot be explained by it.Based on previous research results,fama-french(2015)improved the model by introducing profitability factor and investment factor and established a five-factor model.Compared with western developed countries,China’s stock market is still immature,and the fama-french factor model may not fully explain the difference between Chinese stock returns.In China,a large number of empirical tests have been conducted on the three-factor model.This paper tested the effectiveness of the new five-factor model in China’s stock market,and compared it with the six-factor model adjusted by liquidity and price-earnings ratio.This article selects the A shares data after the reform of non-tradable shares,that exchange in Shanghai stock exchange and shenzhen stock exchange in January 2007-June 2018.Then,respectively examined the effectiveness in China’s stock market of Fama-French three factor model,Fama-French five factor model and new six factor justed by liquidity and p/e ratio.Through empirical analysis,the following conclusions are drawn :(1)this paper selects the latest sample data after the reform of non-tradable shares,The research shows that there is a significant market value effect and book-to-market ratio effect in the current stock yield rate of China,while the profitability effect and investment effect are weak,and finds that the p/e effect and liquidity effect are very significant.In terms of specific stock characteristics,stocks with small market value,high book-to-market ratio,strong profitability,large investment,high price-to-earnings ratio and strong liquidity have higher return rate.However,the above four effects of stock yield in the United States are all significant,and the yield of stocks with fewer investments is higher.(2)the fama-french three-factor model showed significant excess returns and pricing anomalies in multiple stock portfolios,including small mark-low profitability,large mark-high investment and so on.However,the fama-french five-factor model was effective in pricing all stock portfolios without significant excess returns,which had a good explanatory effect on Chinese stock returns.(3)replacing the value factor HML with the price-earnings ratio factor LMH and adding the liquidity factor into the six-factor model can improve the explanatory ability of the model,especially for the price-earnings effect,liquidity effect and the stock return rate of medium size,which are better than the FF five-factor model.(4)in this paper,when using the 2*3 and 2*2 grouping methods of Fama and French(2015),the complexity of factor construction increased and expanded due to the increase of new factors,especially the SMB scale factor construction of different models was processed separately.(5)in terms of the GRS test from Fama and French(2015),the original joint test of F distribution was simplified.The chi-square distribution could also achieve the effect of comparing the overall performance of the model,which reduced the difficulty in the statistical test process and increa sed the operability and applicability of GRS test.