Empirical study on China stock market base on Fama-French model

Abstract

There are a lot of argument about three factor studies by Fama and French. Furthermore, there is also no certain confirmation about the three factor effects in china stock market. This study employed the three-factor model to determine the significant factors that affect China Shanghai Security Exchange (SSE). Factors chosen in this study were A-share index, size and Book-to-Market Ratio (BM). The regression between the portfolio returns and three factors was explored in the study. The results showed that the larger the size of the portfolio the lower the average returns were, contrarily, the average returns were higher for portfolios with higher BM. However, this study did not show significant influence on SSE. There should be more work on China stock market and other factors should be explored.