| Asset pricing theory plays a very important role in the theoretical system of financial economics.It tries to explain the price or value of assets to be paid in the future under uncertain conditions.Fama and French put forward the famous three-factor theory in 1993,which found that the market capitalization factor,book-to-market ratio factor and risk premium factor had a strong ability to explain the cross-sectional returns of stocks.Fama and French(1993)'s three-factor model(FF3model)explained the anomalies of efficient markets;On the basis of the three-factor model of Fama and French(1993),Carhart(1995)added the abnormal factor of one-year return momentum to construct a four-factor model which is widely applied to funds.As the founders of asset pricing theory,Fama and French's latest achievement is the Fama-French five-factor model proposed in 2015.Based on the original three-factor model proposed in 1993,this model takes the company's profitability and investment style as the indicators,introduces the profit factor and investment factor,improves the model's explanatory ability to the stock market return rate,and strengthens the economic theoretical basis of the factor model.Although the establishment of China's securities market started later than that of western countries,it has been 31 years since the early 1990 s,after the stock reform,the listing on the Growth Enterprise Board and the listing on the Science and Technology Innovation Board.Through the national regulation and the market's own regulation ability,the system has become more and more perfect.However,China's securities market is still not mature securities market,such as the securities investment market laws and regulations are not perfect,market effectiveness is not good,the structure of the capital body is not reasonable and many other problems.Therefore,this paper mainly studies the applicability of various types of multi-factor models in China's A-share market,as well as the applicability of each model.Due to various reasons such as different national regulatory systems and national conditions,China's stock market is quite different from the western stock market represented by the United States.Therefore,many scholars believe that the factor model is not applicable to the immature Chinese market.With the improvement of market system and economic theory,domestic scholars have found that the value factor constructed by monthly portfolio updating method is significantly positive at the 1% confidence level,which is consistent with the general conclusion drawn by foreign scholars.We can see the factor pricing model,which has A certain explanatory ability in the Chinese market,and there are many scholars to explore,but we have not found an authoritative model suitable for China's A share market.In this paper,A total of 10 years and 120 months 'data of A-shares in Shanghai and Shenzhen Stock Exchange(including A-shares in Shanghai and Shenzhen Stock Exchange and the Growth Enterprise Market)from May 2009 to April 2019 are selected as samples.After sorting out the sample data and not putting it into the constructed factors,the specific data can be obtained.The applicability of each model can be tested through regression analysis and principal component analysis.Through empirical test,the selected data were put into the constructed three-factor,four-factor and five-factor models to carry out empirical test.It was found that compared with the Fama-French three-factor model and the Carhart four-factor model,the Fama-French five-factor model was better than the Fama-French five-factor model.It has A better ability to explain the excess return of China's A share market.And it is found that the market risk factor Mktrisk,market value factor SMB and investment style factor CMA are very representative to explain China's A share market. |
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