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Fundamental Analysis in China: An Empirical Study of the Relationship between Financial Ratios and Stock Prices

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journal contribution
posted on 2020-04-08, 16:31 authored by Lijuan Ma, Marcel Ausloos, Christophe Schinckus, HL Felicia Chong
The informational context is regularly questioned in a transitional economic regime like the one implemented in China or Vietnam. This article investigates this issue and the predictive power of fundamental analysis in such context and more precisely in a Chinese context with an analysis of 3 different industries (media, power, and steel). Through 3 different kinds of correlation, we examine 25 financial determinants for 60 Chinese listed companies between 2011 and 2015. Our results show that fundamental analysis can effectively be used as an investment tool in transitional economic context. Contrasting with the EMH for which the accounting information is instantaneously integrated into the financial information (stock prices), our study suggests that these two levels of information are not synchronized in China opening therefore a door for a fundamental analysis based prediction. Furthermore, our results also indicate that accounting information illustrates quite well the economic reality since financial reports in each industry can disclose a part of stock value information in line with the economic situation of the industry under consideration.

History

Citation

Ma, L. , Ausloos, M. , Schinckus, C. and Chong, H. (2018) Fundamental Analysis in China: An Empirical Study of the Relationship between Financial Ratios and Stock Prices. Theoretical Economics Letters, 8, 3411-3437. doi: 10.4236/tel.2018.815209.

Version

  • VoR (Version of Record)

Published in

Theoretical Economics Letters

Volume

8

Issue

15

Pagination

3411 - 3437 (27)

Publisher

Scientific Research Publishing, Inc.

issn

2162-2078

eissn

2162-2086

Acceptance date

2018-11-26

Copyright date

2018

Available date

2018-11-29

Publisher version

https://www.scirp.org/journal/PaperInformation.aspx?PaperID=88850&#abstract

Notes

30 pages, 19 Tables, 36 references

Spatial coverage

China

Language

en

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