Analysis of Financial Asset Pricing Model for Portfolio Investment based on Principal-Agent Theory Perspective

Junhao Hu ()
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Junhao Hu: Tsinghua University High School

A chapter in Proceedings of the 2023 International Conference on Economic Management, Financial Innovation and Public Service (EMFIPS 2023), 2024, pp 145-156 from Springer

Abstract: Abstract If investors entering the securities market want to make rational investment decisions, they need to understand whether the current financial asset prices truly reflect the intrinsic value of the market economy, and the important discriminatory basis that can help investors invest accurately is the past theories of securities investment and financial pricing theory. The existing financial asset pricing models do not involve explicit investment variables, and therefore their ability to price financial assets is relatively limited. Based on the above research background, a financial asset pricing model for portfolio investment based on the principal-agent theory perspective is proposed. This paper takes the basic concepts of principal-agent theory as an entry point to study the trend of the economic system of portfolio investment in the general environment of market economy, and then derives the expression form of the financial asset pricing model of portfolio investment based on known indicators of financial asset variables. By analyzing the numerical statistical results of the investment variables of a certain A-share pricing model, it can be seen that when the price to book ratio index remains constant, the higher the valuation level of securities investment, the stronger the liquidity of financial assets. At this time, the derived pricing model can better reflect the change law of financial assets, thus helping investors to make rational securities investment decisions.

Keywords: Principal-Agent Theory; Portfolio Investment; Financial Assets; Pricing Models; Investment Variables (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-441-9_14

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DOI: 10.2991/978-94-6463-441-9_14

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