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An Empirical Analysis of the Fama-French Three-Factor Model in A-Share Market

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DOI: 10.23977/IEMETC2020007

Author(s)

Luo Juncheng, She Yuning

Corresponding Author

Luo Juncheng

ABSTRACT

Compared with the characteristics of the early start and mature development of the stock market in Western countries, the Chinese stock market has many particularities. With the rapid growth of China's economic construction, the healthy development of the stock market is increasingly related to the healthy development of the national financial system. Therefore, based on the particularity of the Chinese stock market, it is of great significance to continuously use the latest data to test the adaptability of asset pricing models. The empirical study in this paper uses the theoretical framework of the Fama-French three-factor model to test the applicability of the Fama-French three-factor model empirically. This empirical study shows that the Fama-French three factors have good applicability in the Chinese stock market, which can almost entirely explain the stock returns of the Chinese A-share market from 2001 to 2019. Besides, it also proves that there are apparent small-scale effects in the Chinese A-share market, but the book-to-market ratio effect is weaker.

KEYWORDS

Fama-Frech three factors, stock returns, scale effect

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