China's Green Finance Premium Anomalies Based on Factor Models

The positive externalities of green producers usually reduce the company's earnings. Whether the markets give sufficient premium is important. Sampling the data of listed companies from May 2005 to April 2017 in Shanghai and Shenzhen A-share main-board markets, we construct 12 portfolios based on market factor RMRF, scale factor SMB, book-to-market factor HML and green factor GF. Results show: 1) SMB premium is significant positive, while HML is negative; 2) For green concept stocks, HML has a significant positive impact; 3) Portfolio with non-green concept stocks has a higher return; 4) GF has a significant negative risk premium on China’s green concept stocks, and the premium level will decrease as the book-to-market ratio increases. The interpretation of the above premium anomalies improves national environmental protection policies which is of great significance for the formation of a sound environmental protection industry. Keywords: Factor Model; Green Finance; Premium Anomalies; Excess Return; Environmental Protection.