Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)

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Comparison of Different Asset Pricing Models Based on Alibaba and Tencent Stocks

Authors
Simin Lu1, Xiaoyu Li2, Yue Qi3, Zhen Zheng4, *
1Research Institution of Economics and Management, Southwestern University of Finance and Economics, Chengdu, Sichuan610000, China
2Asia-Australian Business College Liaoning University, Liaoning 110000, China
3School of Business Administration, South China University of Technology, Guangzhou, Guangdong 510000, China
4School of Finance, Jiangxi University of Finance and Economics, Nanchang, Jiangxi 330000, China
*Corresponding author. Email: 2201802856@stu.jxufe.edu.cn
Corresponding Author
Zhen Zheng
Available Online 15 December 2021.
DOI
10.2991/assehr.k.211209.511How to use a DOI?
Keywords
Asset valuation; Dividend forecast; Fama-French model; CAPM
Abstract

Determining the reasonable price for financial assets has always been hot topic in the field. In the search for the factors in the asset pricing, the prevailing methods are Capital Asset Pricing Model (CAPM) and Fama-French factor (FF3F) method. In addition, Dividend Discount Model (DDM) method is also commonly used for stock valuation. The paper deals with evaluating the stock price of Alibaba Group and Tencent using CAPM model, DDM method and FF3F model. Through empirical test, the results obtained by the three models all show that the expected return rate of Tencent Group is greater than that of Alibaba. Through the CAPM model, we consider the impact of market risk on the price of the portfolio, and then we consider the DDM method which focuses on the stock rather than the entire portfolio and simplifies the input and variables compared with the CAPM model. By making a comparison with results of CAPM model and DDM method, we are also comparing the actual value and fair value of the two companies respectively. Finally, FF3F model considers the influence of value premium and size premium based on the CAPM model, and the expected return results obtained are more accurate, which shows that the stock prices of the two companies are overvalued to some extent. In conclusion, the assumptions of CAPM model and DDM method are different, and FF3F model make some improvements based on the CAPM model. In practical application, we should analyze specific problems according to the actual situation.

Copyright
© 2021 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article under the CC BY-NC license.

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Volume Title
Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
Series
Advances in Economics, Business and Management Research
Publication Date
15 December 2021
ISBN
978-94-6239-483-4
ISSN
2352-5428
DOI
10.2991/assehr.k.211209.511How to use a DOI?
Copyright
© 2021 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article under the CC BY-NC license.

Cite this article

risenwbib
TY  - CONF
AU  - Simin Lu
AU  - Xiaoyu Li
AU  - Yue Qi
AU  - Zhen Zheng
PY  - 2021
DA  - 2021/12/15
TI  - Comparison of Different Asset Pricing Models Based on Alibaba and Tencent Stocks
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 3118
EP  - 3124
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.511
DO  - 10.2991/assehr.k.211209.511
ID  - Lu2021
ER  -