Evaluating the Performance of Factor Pricing Models for Different Stock Market Trends: Evidence from China

作者：Shu, Haicheng; Wang, Yu^*; Yuan, Jie

来源：Emerging Markets Finance and Trade, 2022, 58(8): 2153-2180.

DOI：10.1080/1540496X.2021.1964949

• Asset pricing
• factor models
• market trends
• chinese stock market

This paper examines the performance of three famous factor pricing models in markets of bull, bear, and consolidation in China. Empirical results show that these models explain the time-series variations in portfolio returns in bearish market reasonably well, but fail to explain the cross-sectional variations. Another two findings are revealed by instability tests. First, the three models are more unstable in trending (i.e., bearish and bullish) markets under time-series regression due to the higher stock price synchronicity. Second, greater instability causes the unitary parameter estimates less reliable and brings about difficulties in explaining the cross-sectional portfolio returns in trending markets.

• 单位
  西南财经大学; 厦门大学; y