The risk of a securities asset can be divided into two parts, one part is related to the whole market, that is, systemic risk; It is a unique part of oneself, called individual risk. Among them, the individual risks in the investment process mainly include the company's industry and business risks, such as the recent ZTE incident. Personal risk is difficult to judge, and it can also be dispersed through portfolio. There is not much research here. The focus is on finding systemic risks, which are part of asset and market volatility.
Define the correlation between assets and market portfolio as "beta". Is this asset more risky or less risky than the market? Beta is greater than 1. This kind of asset is more risky than the market, and vice versa. If the beta of this asset is 2, then the price of this asset should be the bargaining price of market 2. If the market price of this asset is more than 2 times, it can be called high valuation.
This is the Capital Asset Pricing Model (CAPM). It was put forward by financial economists such as Sharp in 1964. Together with the efficient market hypothesis, it is the two cornerstones of modern finance.
I. Three-factor model of asset pricing (market, scale and value)
During the bull market of 15, some great funds appeared. For example, several experts from Huitianfu invested in some high-priced stocks such as Shenzhen Chuangban, All-pass Education and An Shuo Information. Their performance is much better than that of the Shanghai and Shenzhen 300. In this case, at that time, I felt that these fund managers were super cattle.
But this is not the case.
In Fama-French model, besides the market risk mentioned above, the systematic risk of assets also includes two other factors: scale factor and value factor. These two factors are also the pricing factors of assets.
Scale factor: companies with small market value bear greater risks and higher risk premium. Represents a small-scale asset, and its correlation "beta" with market portfolio (CSI 300) is greater than 1. When the market is good, its income will be great; However, when the market falls, his loss is greater than the loss of the market portfolio.
Value factor: companies with low P/B ratio may have a risk premium than growth companies with high P/B ratio because of poor fundamentals and large fluctuations; Perhaps it is the misjudgment of investors. If the valuation is revised, there will be high returns.
Finally, through years of data verification, which assets have higher returns, 90% can be explained by these three factors, which basically explains the differences in returns of various stocks.
When we see this model, we can know that, in many cases, fund managers get excess returns not because of their ability, but by using the above two risk factors.
Second, the momentum factor (trend trading)
In the A-share market, we often hear media comments that retail investors are irrational in chasing up and down, which leads to excessive market volatility. In fact, this is very amateur. In financial research, retail investors are not chasing up and down at all, but chasing up and down.
In fact, in the past data, the most profitable strategy of institutions is "chasing up and killing down", which is also called momentum trading. Among asset pricing factors, it is also a well-known pricing factor.
In this way, the institution used the corresponding trading strategy, buying the assets with the highest income last month and selling the group with the lowest income. Then it is found that in the next 3- 12 months, this strategy has achieved good excess returns. After it was discovered in 1950s, most funds in the American market adopted this strategy to win excess returns in the next 30 years.
So if momentum is mispriced, the market is efficient. Then the arbitrage space of this excess return should disappear soon, and there will be no long-term excess return. The possibility that excess returns always exist is that momentum is also a systemic risk and needs a risk premium. So it should also be regarded as a pricing factor.
Momentum is a risky strategy, and when the market is good, you can get excess returns. When the market is bad, it is easy to lose money. In the A-share market, this momentum lasts for a short time, only 2-4 weeks, because of the large trading volume. If it rises sharply this week, it may rise again in the next 2-4 weeks; On the contrary, it will continue to fall in the next 2-4 weeks.
Third, speculative factors.
In Fama-French's three-factor model, the value factor is not as obvious in China market as it is in the US market. A large number of data prove that in the A-share market, speculative factors have a strong explanatory power to the price.
It is difficult for a large number of investors to accurately judge the intrinsic value of assets, and they tend to choose those assets that others will also buy and thus will rise. This behavior is normal in the market, and asset prices face the risk of deviating from fundamentals for a long time. Therefore, asset prices should also include the risk premium of speculation, that is, speculative factors.
Speculation scale: abnormal turnover rate. In developing countries and markets, the abnormal turnover rate is particularly high; But it is relatively low in the mature capital market.
Construct the corresponding trading strategy, and buy and sell the combination with the lowest abnormal turnover rate and the highest abnormal turnover rate every month. The annualized rate of return of this strategy is stable at 2 1%, and the abnormal turnover rate can really affect the future rate of return of A shares, which is a unique pricing factor in China market.
In China market, speculation is not an individual phenomenon or individual risk, but a systemic risk. When speculation becomes a systemic risk, it actually has a risk premium, which can become a risk pricing factor and smart people can use it to make money. Moreover, the component of speculation in the A-share market is far greater than the value, so the role of this factor is far greater than the value factor, which will be explained in depth later.
These are the five factors of asset pricing, which describe the portrait of the market more accurately. For the risks in the market, I feel that from superstition and wildness to observation and summary, I am gradually discovering the deep truth behind it.