An Analysis of the Applicability of Pricing Models in the Chinese Stock Market

Abstract

The stock market in China has an important position in the world, but it has not been able to find a pricing model suitable for the market. This paper reviews the history and development of various pricing models, analyzes relevant research on their application in the Chinese stock market, and discusses the applicability of various pricing models. It is found that the applicability of the capital asset pricing model (CAPM) in China is low; the applicability of the Fama-French three-factor model and the Fama-French five-factor model is better than CAPM, but there is significant controversy over the advantages and disadvantages of the two. It is also found that the applicability of the five-factor model may have regional differences in different markets, and there may be differences in redundant factors in different markets. It is proposed that future research should obtain more accurate market data, explore new influencing factors, and build a pricing model more suitable for the stock market in China by combining the characteristics based on more advanced data analysis technology.