Pricing Intellectual Capital in Asset Pricing Models: A study on Shanghai Stock Exchange
DOI:
https://doi.org/10.22555/pbr.v26i1.1180Keywords:
Intellectual capital, CAPM, Fama-French model, IC augmented model, Shanghai Stock ExchangeAbstract
This study aims to examine the validity of intellectual capital as a priced risk factor in the asset pricing model. We have used the data of companies listed on the Shanghai Stock Exchange from 2000 to 2021. To test the models, time series as well as cross sectional analysis have been done using the Fama-MacBeth method. The results show that intellectual capital is a significant risk factor and after augmenting IC into asset pricing models improves the explanatory power to explain the variation in the stock returns. It further suggests that IC can be priced in the Chinese market, over and above what can be explained by covariance risk, size, value, investment and profitability factors.
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