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Vol.2 , No. 6, Publication Date: Oct. 29, 2015, Page: 65-73
| [1] | Yajie Wang, School of Management, Harbin Institute of Technology, Nangang District, Harbin, P.R. of China. |
| [2] | Elias C. Grivoyannis, Department of Economics, Yeshiva University, New York, USA. |
| [3] | Hui Li, School of Management, Harbin Institute of Technology, Nangang District, Harbin, P.R. of China. |
RMB exchange rate is increasing volatile and its influence on Chinese stock market is more and more strongly. In this paper, volatility of RMB exchange rate as another factor is implanted into the traditional Fama-French three-factor model to build an improved asset-pricing model. And this paper evaluates each factor's influence on stock risk premium using data of A-share listed companies in China from 2008 to 2012. The results show that market factor, scale factor and volatility factor of RMB exchange rate, all have strong explanatory power on equity risk premium and the risk of the three factors is also priced. The risk represented by the exchange rate volatility factor is the exchange rate exposure faced by Chinese stock market. This finding provides some actual evidence for the fact that exchange rate fluctuation has a noticeable impact on Chinese stock market.
Keywords
The Risk Premium, Three-Factor Model, Exchange Rate Volatility, Price of Risk
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