Empirical Test and Analysis of Capital Asset Pricing Model (CAPM) in China's Capital Market

Jiahui Zhang

doi:10.54097/p7w24q63

Authors

Jiahui Zhang

DOI:

https://doi.org/10.54097/p7w24q63

Keywords:

Capital Asset Pricing Model (CAPM), Weekly Return, Excess Return, Systematic Risk (Beta Coefficient)

Abstract

Based on the obtained data of 80 stocks in Shanghai A-shares from August 5, 2016 to August 4, 2019, this paper empirically tests the applicability of the capital asset pricing model (CAPM) in China's capital market. Through regression analysis and time series analysis, the association between systematic risk (beta coefficient) and stock returns, as well as the impact of non-systematic risk on stock returns, are studied. The results show that from August 5, 2016 to August 4, 2019, the beta coefficient is significantly positively related to the excess return of stocks, but non-systematic risk has no significant impact on stock returns, which is consistent with the core assumptions of CAPM. Nevertheless, the explanatory power of CAPM is weakened during periods of high market volatility, reflecting the uniqueness of China's capital market.

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