A Study On The Low-Risk Anomaly Of Macro Factors In Chinese Stock Market

Classical theories such as the International Capital Asset Pricing Model believe that macro risk is systemic risk,which should be priced in the market and be positively correlated with return.But stock market cannot be perfect in reality,frequent anomalies in the stock market have a strong impact on the classical theories,such as herding effect,MAX anomaly,sorting effect,etc.These financial anomalies make stocks be priced deviate from the basic value and bring great challenges to classical theory.The relationship between return and risk has always been the core issue that scholars pay attention to.Based on the actual situation of the Chinese stock market,this paper provides a perspective of investor sentiment and limits of arbitrage for the study of lowrisk anomaly of macro factors,which is important to reduce the excessive volatility of the stock market and improve the pricing efficiency of the stock market.Firstly,this paper expounds the theoretical basis of investor sentiment and limits of arbitrage affecting the low-risk anomaly of macro factors and puts forward research hypotheses.Secondly,this paper constructs investor sentiment index and limits of arbitrage index which are consistent with the characteristics of A-share stock market.On the one hand,the method of principal component analysis is used to construct the investor sentiment index.On the other hand,limits of arbitrage index is constructed by using the method of homogenization and standardization.Thirdly,the paper proves the existence of low-risk anomaly of macro factors in A-share stock market through constructing portfolios and Fama-Mac Beth regression.Fourthly,the paper groups the stocks by investor sentiment index and macro factors sensitivities to explore the impact of investor sentiment on macro factors returns,and use multiple regression to study the impact of investor sentiment on excess returns.Finally,the paper groups the stocks by investor sentiment index,limits of arbitrage index and macro factors sensitivities to explore the joint effects of investor sentiment and arbitrage limits on macro factor returns,and study the impact of investor sentiment and limits of arbitrage on macro factors through Fama-Mac Beth regression method.The empirical results of this paper prove the existence of low-risk anomaly of macro factors in the A-share stock market and show that the influence of investor sentiment and limits of arbitrage on anomalies depends on the state of investor sentiment in the market.In optimistic periods,the market is dominated by irrational investors,so the combined effect of optimism and limits of arbitrage makes stock further overvalued and anomaly more serious.In pessimistic periods,more rational investors in the market decrease the degree of mispricing,so changes in investor sentiment and limits of arbitrage have little impact on anomaly.