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Tian, Xinqi (2022) TESTING OF CAPITAL ASSET PRICING MODEL: AN EMPIRICIAL ANALYSIS BASED ON THE SHANGHAI AND HONG KONG STOCK MAEKETS. [Dissertation (University of Nottingham only)]

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Abstract

The CAPM model attempts to represent people's complex investment decisions

through a series of rigorous assumptions about the real stock market. The CAPM

model attempts to express people's complex investment decisions in terms of

numerically calculated utility values. However, the conditional assumptions of the

CAPM model cannot really be met, even in more mature equity markets. As an

important theory of financial asset pricing, the applicability of the CAPM model in

real capital markets is naturally attracted to research. In this paper, the Shanghai

and Hong Kong stock markets are used as the subject of study to test the validity

of the CAPM model for the period 27 November 2016 - 21 November 2021. The

test is based on the Fama-Macbeth Approach, in which the portfolios are no longer

grouped in order of β size, but a representative market portfolio is selected as the

portfolio for time series regression and cross-sectional regression on market

indicators (method from Wei, 2016). The regression results show that in the time

series regression, both the Shanghai equity market and the Hong Kong equity

market exhibit a linear relationship between the excess returns of the portfolio and

the excess returns of the market, but in the cross-sectional regression, the linear

relationship shown by the CAPM model exists in the Shanghai equity market for

only one time period, while in the analysis of the Hong Kong equity market, there

are two time periods that conform to the CAPM model. In contrast, the CAPM model

is more valid in the Hong Kong market than in the Shanghai equity market, but

overall, the CAPM model is not applicable to both markets.

Item Type:	Dissertation (University of Nottingham only)
Depositing User:	Tian, Xinqi
Date Deposited:	28 Apr 2023 10:19
Last Modified:	28 Apr 2023 10:19
URI:	https://eprints.nottingham.ac.uk/id/eprint/68207

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