Under the inspiration of Fama and French asset pricing model, this paper mainly studies the relationship between the month return of A shares and the factors that may have an effect on the stocks’ month return. It also compares the differences in the reaction of all shares and GEM board shares to these factors. It is important to highlight that these factors include the market, firm size, earnings and book-to-market information. The data used in this project comes from the quarterly data of China stock market from March of 2000 to December of 2011 and was used in panel model regressions. The regression time period of A shares is from March of 2000 to December of 2011, and the regression time period of GEM board shares is from December of 2009 to December of 2011 as a consequence that China’s GEM board was officially established in October 30th of 2009. This document will show several linear models to explain the correlation between stock return (A shares and GEM board shares) and the factors (market factor, firm size factor, earning factor and book-to-market factor). Based on the result of the empirical study, we found that relative small book-to-market ratio may have positive effect on the stock returns of A shares and GEM board shares. Also that for the GEM board shares, relative smaller size and relative higher earnings are good for the price to rise. And that for A shares, size factor and earning factor have little influence on the stock return. Finally the GEM board shares are more sensitive to market factor than A shares.

Recommended Citation

Jiang, Y. (2015). Factors in the returns on stock: Inspiration from Fama and French asset pricing model. Lingnan Journal of Banking, Finance and Economics, 5. Retrieved from http://commons.ln.edu.hk/ljbfe/vol5/iss1/1