Comparison of Different Asset Pricing Models Based on Alibaba and Tencent Stocks
- 10.2991/assehr.k.211209.511How to use a DOI?
- Asset valuation; Dividend forecast; Fama-French model; CAPM
Determining the reasonable price for financial assets has always been hot topic in the field. In the search for the factors in the asset pricing, the prevailing methods are Capital Asset Pricing Model (CAPM) and Fama-French factor (FF3F) method. In addition, Dividend Discount Model (DDM) method is also commonly used for stock valuation. The paper deals with evaluating the stock price of Alibaba Group and Tencent using CAPM model, DDM method and FF3F model. Through empirical test, the results obtained by the three models all show that the expected return rate of Tencent Group is greater than that of Alibaba. Through the CAPM model, we consider the impact of market risk on the price of the portfolio, and then we consider the DDM method which focuses on the stock rather than the entire portfolio and simplifies the input and variables compared with the CAPM model. By making a comparison with results of CAPM model and DDM method, we are also comparing the actual value and fair value of the two companies respectively. Finally, FF3F model considers the influence of value premium and size premium based on the CAPM model, and the expected return results obtained are more accurate, which shows that the stock prices of the two companies are overvalued to some extent. In conclusion, the assumptions of CAPM model and DDM method are different, and FF3F model make some improvements based on the CAPM model. In practical application, we should analyze specific problems according to the actual situation.
- © 2021 The Authors. Published by Atlantis Press International B.V.
- Open Access
- This is an open access article under the CC BY-NC license.
Cite this article
TY - CONF AU - Simin Lu AU - Xiaoyu Li AU - Yue Qi AU - Zhen Zheng PY - 2021 DA - 2021/12/15 TI - Comparison of Different Asset Pricing Models Based on Alibaba and Tencent Stocks BT - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) PB - Atlantis Press SP - 3118 EP - 3124 SN - 2352-5428 UR - https://doi.org/10.2991/assehr.k.211209.511 DO - 10.2991/assehr.k.211209.511 ID - Lu2021 ER -