Abstract
As the representative index of small and medium-sized stocks in China’s stock market today, the CSI 1000 index has been concerned by investors in the past. With the official approval of the transaction of CSI 1000 index futures, this index has become a popular investment target today. This paper tests the accuracy of Fama French model of three and five factors in pricing CSI 1000 index returns. This paper selects 156 month returns of CSI 1000 index constituent stocks as the test object, and uses Alpha Intercept test to compare two Fama French factor models. It is found that the model with only three factors is better than the model with five factors in the value group and investment group, but weaker than the model with five factors in the profit group. There are some differences between the two factor models in their ability to explain the returns of different stock groups, but in general, the model of three factors is more accurate in the pricing results of CSI 1000 index, and has a stronger explanatory power for the changes in index returns. It is hoped that this conclusion can provide a reference for investors to select factor models to study the CSI 1000 index.
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Zhou, W. (2023). A Comparative Study of Fama-French Five Factor Model and Three Factor Model – A Case Study of CSI 1000. In: Dang, C.T., Cifuentes-Faura, J., Li, X. (eds) Proceedings of the 2nd International Conference on Business and Policy Studies. CONF-BPS 2023. Applied Economics and Policy Studies. Springer, Singapore. https://doi.org/10.1007/978-981-99-6441-3_138
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DOI: https://doi.org/10.1007/978-981-99-6441-3_138
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