Proceedings of the 2025 3rd International Academic Conference on Management Innovation and Economic Development (MIED 2025)

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Comparative Analytical Study of CAPM Model and Fama-French Three-Factor Model - A Case Study of the Chinese Market

Authors
Xinyuan Zhang1, *
1College of Social Sciences, University of Birmingham, Birmingham, B15 2TT, United Kingdom
*Corresponding author. Email: zxyuan666666@163.com
Corresponding Author
Xinyuan Zhang
Available Online 17 September 2025.
DOI
10.2991/978-94-6463-835-6_95How to use a DOI?
Keywords
Capital Asset Pricing Model; Fama-French Three-Factor Model; Chinese Stock Market; Asset Pricing; Factor Analysis
Abstract

As the limitations of the traditional Capital Asset Pricing Model (CAPM) in explaining real-world market returns become apparent, an increasing number of studies are focusing on the effectiveness of multi-factor models. This study conducts a comprehensive comparative analysis of the Capital Asset Pricing Model (CAPM) and the Fama-French three-factor model in the context of China’s capital market. This research selects a representative sample of listed companies from various industries on the Shanghai and Shenzhen stock exchanges during the period from 2023 to 2024. Using empirical methods including regression analysis, R2 comparison, risk premium stability tests, and regression coefficient significance tests, the study evaluates the explanatory power and robustness of both models. The results of this paper show that the Fama-French three-factor model significantly outperforms the CAPM in explaining stock returns in the Chinese market. The Fama-French three-factor model effectively captures the size effect and value effect, which are prevalent in emerging markets such as China. However, both models exhibit limitations in accounting for time-varying risk premiums and market anomalies, indicating room for further model refinement.

Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2025 3rd International Academic Conference on Management Innovation and Economic Development (MIED 2025)
Series
Advances in Economics, Business and Management Research
Publication Date
17 September 2025
ISBN
978-94-6463-835-6
ISSN
2352-5428
DOI
10.2991/978-94-6463-835-6_95How to use a DOI?
Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Xinyuan Zhang
PY  - 2025
DA  - 2025/09/17
TI  - Comparative Analytical Study of CAPM Model and Fama-French Three-Factor Model - A Case Study of the Chinese Market
BT  - Proceedings of the 2025 3rd International Academic Conference on Management Innovation and Economic Development (MIED 2025)
PB  - Atlantis Press
SP  - 896
EP  - 904
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-835-6_95
DO  - 10.2991/978-94-6463-835-6_95
ID  - Zhang2025
ER  -