Can Jump Characteristics Be Used As Pricing Factors ——An Empirical Study Based On China's A-share Market

From single factor model to multi factor model,asset pricing theory has been evolving and developing.Scholars have been trying to find out the change law of the stock market,explore the effective factors of travel,and expect to obtain excess returns.The proposition of Fama-French five factors is a great development of asset pricing theory.Its effectiveness in foreign markets has been tested by many scholars.However,different markets have their unique characteristics,and its effectiveness in Chinese markets has yet to be verified.In addition,the change of asset price is a complex process.In the past,people always believed that the price follows continuous change.However,in reality,the price of many financial assets will fluctuate and even jump in the short term.Because the jump risk of stocks is often difficult to be dispersed by investment strategies,it is very necessary to take the jump risk into account when pricing assets.Therefore,this paper uses the 5-minute high-frequency data of Shanghai Composite Index from early May 2006 to the end of April 2020,uses the double power variation nonparametric method to test the market jump behavior of China's stocks,and constructs the jump risk factor,and then takes the Fama-French five factor model as the basis,and because many mathematicians have found that the investment factor has poor stability in China's market,even redundant factors,Therefore,after empirically confirming this conclusion,this paper removes the investment factor and adds the jump risk factor to build a new five factor model,compares the application of the new five factor model with the traditional five factor model in China's A-share market,and discusses whether the jump feature can be used as a new pricing factor.The specific process is as follows: first,the asset pricing model such as CAPM model,This paper introduces the development of Fama-French three factor model and five factor model,and combs the research on the jump characteristics of capital market as the theoretical basis of this paper;Second,explain the data processing method and the construction of the model;Thirdly,the selected samples are grouped for descriptive statistics,and the results of different grouping descriptive statistics are analyzed.Then the correlation test and redundancy factor test of the five factors are carried out,and it is found that the investment factors in China's A-share market are redundant.In addition,this conclusion is also drawn based on the time series regression of the grouping of scale book value ratio,scale profitability and scale investment level,which provides an empirical basis for the model construction of this paper;Fourth,the constructed model,the new five factor model,is grouped descriptive statistics to judge the impact of jump characteristics on stock returns,and then cross grouped time series regression is carried out to verify whether the new five factor model with jump risk factor has better explanatory effect on excess returns.Combined with GRS test,the pricing efficiency of the model is verified,and the robustness of jump risk factor is tested.Finally,the main conclusions of this paper are as follows:(1)jump characteristics can bring excess returns.The construction of jump risk factor and the addition of five factor model significantly improve the interpretation of the model.The goodness of fit of the new five factor model is better and has higher pricing efficiency.Jump risk factor can be used as an effective expansion factor.(2)The scale factor and market factor in Fama French five factor model and the modified five factor model are very stable,and have a very significant impact on the excess return.The book to market ratio and profit factor also have a relatively stable impact on the excess return,while the investment factor is found to be redundant in the Chinese market through empirical test.