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Sponsored by the Center for Science and Technology Development of the Ministry of Education
Supervised by Ministry of Education of the People's Republic of China
With the continuous development and improvement of China's financial market, the factors which influenced stock returns and investment behavior become more and more complex. This paper will build a new capital asset pricing model importing RMB exchange rate volatility factors based on traditional Fama-French Model. It will be applied OLS regression analysis model selecting the stocks of ShenZhen and ShangHai markets from 01/2003 to 12/2013. By doing this, it is found out that Real exchange rate volatility factor is an important factor in the risk premium of A shares and Fama-French model established in our Country. As well Economies of scale and effects of book-market ratio are significant. The Fama-French Model of short-term is more stable than the long-term model.
Keywords:Fama-French model;Real exchange rate volatility factor;Scale factor;Book-Market ratio factor;Market factor