Research On The Applicability Of Multi-factor Asset Pricing Model In China's Capital Market

With the rapid development of China's stock market,with the split share reform,Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect open,the opening of the new three boards and the adjustment of the IPO system,it does make our stock market more marketable,but because of the characteristics and changes of our market and the western stock market There are certain differences,so whether the financial theory based on the western market is adapted to the reality of the Chinese stock market is a problem facing China's stock market.Fama and French established the five factor model by adding two variables of RMW and CMA on the basis of the original three factor model,and found that the five factor pricing model of the three factor model had better interpretation ability than the five factor model of the three factor model by analyzing the stock market analysis in many countries.Whether the five factor capital asset pricing model has the same situation in China's stock market is still uncertain.Therefore,this paper makes an empirical analysis of the good applicability of CAPM,three factor and five factor asset pricing model in China's stock market,and tries to make some reasonable suggestions for Chinese investors to choose the choice of portfolio selection according to the results of the test.Finally,through the test results,this paper considers that first,CAPM,FF three factor and five factor model can effectively explain the stock market returns in China.Second,in China's stock market,the three factor model has better applicability than the five factor model in long term or short term.Third,investors in China's stock market lack investment in the company's prospects and their continued profitability,resulting in no long-term investment.