stock yield in Shenzhen, China: The search of best prediction model

• Main Authors: Clemente Hernández Rodríguez, Mauricio Cervantes Zepeda
• Format: Article
• Language: English
• Published: Universidad de Colima 2010-05-01
• Series: Portes: Revista mexicana de estudios sobre la Cuenca del Pacífico
• Subjects: CAMP; Reward Beta; Modelo tres Factores de Fama y French; Shenzhen; China
• Online Access: http://revistasacademicas.ucol.mx/index.php/portes/article/view/274

This paper focuses on the analysis of forecasting models of financial returns. Particularly, the Capm Model, Reward Beta Model and the Three-factors Model of Fama & French are studied. Through this analysis, the aim is to determine what Model explains better the outcomes of the returns of the China’s Shenzhen Stock Exchange. Tests are performed under the portfolio formation procedure, following the methodology of Fama & French (1992, 1995, 1996), and the two-step regression used by Fama & MacBeth (1973), adapted in the devolving of the Beta Reward Model (Bornholt, 2007). After the analysis, it is concluded that the best forecasting Model of returns for the Shenzhen Stock Exchange is Three-factors Model of Fama & French.