The Application of the Capital Asset Pricing Model (CAPM) in China's Financial Market: An Analysis of Regulatory Impact and International Comparison

Abstract

Indentation of Abstract should be left 0.53"/1.35cm. As the world's second largest economy, China is also one of the world's biggest emerging economies; The Capital Asset Pricing Model (CAPM) is one of the most classic pricing models, and China's asset pricing model has gained a lot of experience from it. This research investigates the application of the CAPM in China's financial market, focusing on the influence of financial market regulation and conducting a comparative analysis with international markets. CAPM is a fundamental asset pricing model used to estimate asset expected returns and risks based on their covariance with the overall market portfolio. The study aims to analyze the practical implementation of CAPM in China's financial market, considering the impact of financial market regulation on the model's effectiveness. Key variables such as market data, risk-free rates, and stock returns are utilized, with specific adjustments made to accommodate China's unique regulatory environment. The research's significance lies in providing valuable insights into asset pricing and risk assessment in China's financial market, as well as implications for investors and policymakers. By comparing the results with international markets, this study contributes to a broader understanding of the CAPM model's applicability and effectiveness in diverse regulatory settings.