The objective of this study is three-fold. First, this study investigates the applicability of the Capital Asset Pricing Model (CAPM) to the Shanghai Stock Exchange (SSE). This study provides the latest estimates for the firm-level and portfolio betas for 1,406 companies in the SSE. Using a simplified method to estimate the portfolio betas, this study finds that the CAPM is applicable for the case of the SSE. Second, this study also finds that international macroeconomic movements captured by GDP growth, exchange rates, and stock market indices in other major markets significantly explain the stock prices for companies listed in the SSE. Finally, this study provides a detailed characterization of firms listed in the SSE in terms of risk, return, and sectoral performance using the most recent data. Companies that are in the real estate sector in China experience a modest average return but with very little risk. Insights from this study is very relevant and important especially for foreign investors who seek to invest in an emerging market like China.
Master of Arts
Major Research Paper