Evaluating the Performance of Factor Pricing Models for Different Stock Market Trends: Evidence from China

Haicheng Shu, Yu Wang and Jie Yuan

Emerging Markets Finance and Trade, 2022, vol. 58, issue 8, 2153-2180

Abstract: This paper examines the performance of three famous factor pricing models in markets of bull, bear, and consolidation in China. Empirical results show that these models explain the time-series variations in portfolio returns in bearish market reasonably well, but fail to explain the cross-sectional variations. Another two findings are revealed by instability tests. First, the three models are more unstable in trending (i.e., bearish and bullish) markets under time-series regression due to the higher stock price synchronicity. Second, greater instability causes the unitary parameter estimates less reliable and brings about difficulties in explaining the cross-sectional portfolio returns in trending markets.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2021.1964949 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:58:y:2022:i:8:p:2153-2180

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2021.1964949

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().