An Empirical Analysis on A Share Market Valuation Based onInternational Valuation Regime
LI Ziran(1) CHENG Siwei(2)
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(1) Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190;(2)Management School of Graduate University of Chinese Academy of Sciences, Beijing 100190
Traditional finance theory argues that the value of a stock is the discounted expected future cash flows over an infinite time horizon, however, empirical analysis on world stock markets shows that the real prices are based on some mid-term fundamental factors such as market expectations on earning growth within a year or two. China's stock market has experienced great fluctuations over the past three years, which caused widely debate on whether it was over or under valued. We reply to these debates by developing a relative valuation model which gives estimated index prices under international stock market's valuation regime and find that the market price has changed from over-valuation in 2007 to an relatively reasonable level in 2008.The model can also be extended to evaluate individual stocks. Implications of the empirical results and some suggestions are provided.
LI Ziran CHENG Siwei. , {{custom_author.name_en}}.
An Empirical Analysis on A Share Market Valuation Based onInternational Valuation Regime. Journal of Systems Science and Mathematical Sciences, 2008, 28(11): 1391-1397 https://doi.org/10.12341/jssms10138
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