The Applicability of Classic Capital Asset Pricing Model in Chinese Stock Market

DOI

10.2991/aebmr.k.220307.201How to use a DOI?

Keywords

Capital Asset Pricing Model; Chinese stock market; Modern Portfolio Theory; New York Stock Exchange

Abstract

China has been one of the largest emerging markets and the second-largest economy in the world since the ‘Reform and Opening-up’ in 1978. However, because of the late development, Chinese financialization is still at a developing stage, and the Chinese stock market opened its first trade in 1989. By contrast, the New York Stock Exchange (NYESE) started in 1789. During these years of development, some models have been built to value the price of assets. The classic Capital Asset Pricing Model (CAPM) was a famous one raised by American scholar Sharpe in 1964, which is a model that indicates the relationship between the expected return of an asset or portfolio and the systematic risk of the market. The classic CAPM model’s applicability has been tested practically in the US. However, China has a different system and a much younger age compared to the financial market in the US. Thus, this paper is going to investigate whether the CAPM model could be applied to Chinese market. The discussion will investigate the CAPM capabilities by referring to scholars’ statistical studies. This paper will provide some statistical analysis and evaluate these methods by comparing Chinese and US markets, which leads to this paper’s conclusion: the CAPM model does not fit into the current Chinese stock market.

Copyright

© 2022 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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TY  - CONF
AU  - Zhiliang Chen
PY  - 2022
DA  - 2022/03/26
TI  - The Applicability of Classic Capital Asset Pricing Model in Chinese Stock Market
BT  - Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)
PB  - Atlantis Press
SP  - 1213
EP  - 1218
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220307.201
DO  - 10.2991/aebmr.k.220307.201
ID  - Chen2022
ER  -