Does the Sci-Tech Innovation Board Make the Chinese Market Better? From the Perspective of the Factor Model
DOI:
https://doi.org/10.54691/bcpbm.v26i.2011Keywords:
The Sci-Tech Innovation Board, Asset Pricing Model, Return of Stock’s Portfolio.Abstract
Given different views on the practicality of the multi-factor models in the Chinese stock market, this paper combines this very advanced pricing model with the newly established Chinese board, aiming to explore a pricing model applicable to the Chinese market. The selected data is all the quoted companies in the Sci-Tech Innovation Board from 2020/06/05 to 2022/04/15. The explanatory power of each multi-factor model to the board and their effects on the model are studied. In particular, this paper includes redundancy tests, GRS tests, and regressions. The main conclusions deduced from this experiment are: first, the three-factor model is very significant in all aspects; second, the five-factor model is more significant in some groups, and there is a significant difference after adjustment by the five-factor model—the book-to-market ratio effect and profitability effect. Nonetheless, since many imperfections exist within the system of the Chinese stock market and many regulations might have significant changes in the future, continuing to explore other pricing factors appropriate for the market is still the main research orientation in this field.
Downloads
References
National Research Council. Globalization of technology: International perspectives[M]. The National Academies Press, 1988, 1-11.
Edoardo G., M. Massimo. Taxing financial transactions in fundamentally heterogeneous markets[C]. Economic Modelling, 2017, 64: 322-333.
Fama, E. F. and K. R. French. The capital asset pricing model: Theory and evidence[J]. Journal of Economic Perspectives, 2004, 18 (3): 25-46.
Carhart, M. On persistence in mutual fund performance[J]. The Journal of Finance, 1997, 52 (1): 57–82.
Aharoni, G., B. Grundy, and Q. Zeng, Stock returns and the Miller Modigliani valuation formula: Revisiting the Fama French analysis[J]. Journal of Financial Economics, 2013, 110(2): 347-357.
Novy, R. Marx. The other side of value: The gross profitability premium[J]. Journal of Financial Economics, 2013, 108(1): 1-28.
Fama, E. F. and K. R. French. International tests of a five-factor asset pricing model[J]. Journal of Financial Economics, 2017, 123(3): 441-463.
Zhang X. and Z. Wang. The practicality test of the Fama-French five-factor model in the A-share market[N]. China Biding News, 2022, (01): 90-93. (In Chinese)
Wu S. and N. Xu. A comparative study on the rational asset pricing model and irrational asset pricing model[J]. Economic Research Journal, 2004, (06): 105-116. (In Chinese)
Tian L., G. Wang, W. Zhang. Fama-French three-factor model pricing: Is China different from the USA?[J]. Studies of International Finance, 2014, (07): 37-45. (In Chinese)
Zhao S., H. Yan, K. Zhang. Does Fama-French five-factor model outperform three-factor model? Evidence from China’s A-share market[J]. Nankai Economic Studies, 2016, (02): 42-60. (In Chinese)
Gao C., X. Zhou. Corporate earnings, investment and asset pricing: An empirical case based on China's stock market[J]. Chinese Journal of Management Engineering, 2016, (4): 9. (In Chinese)
Guo, B., W. Zhang, Y. J. Zhang, and H. Zhang. The five-factor asset pricing model tests for the Chinese stock market[J]. Pacific - Basin Finance Journal, 2017, 43: 84-106. (In Chinese)
Li Z., G. Yang, Y. Feng, & J. Liang. Fama-French five-factor model in China stock market[J]. Journal of Financial Research, 2017, (06): 191-206. (In Chinese)
Kim K. A., R. J. Sweeney. Effects of price limits on information revelation[R]. State University of New York, 2002.
Chen H., L. Fan, Y. Tang. Price limit mechanism and informed investor behavior: Empirical studies based on China’s stock[J]. Journal of Systems Engineering, 2006, (5): 524-528. (In Chinese)
Hu Z. The influence of price limit mechanism on the efficiency and fluctuation of SSM[J]. Journal of Xiamen University[Arts & Social Science], 2004, (2): 100-109. (In Chinese)
Fama, E. F., K. R. French. A five-factor asset pricing model[J]. Journal of Financial Economics, 2015, 116: 1–22.
Downloads
Published
Issue
Section
How to Cite
