Empirical Study On Stock Value Investment Strategy In China Market

Stock investment can hold the balance in fund management, and stock's value investment is one of the broadest strategies nowadays. For different investing fund has different chosen to stock value, so it's difficult to give a definitude definition for value investment. In the normal, people think that value investment is mainly depend on the inter value of the stock, and these type of stock always are not good at his market behavior, and sometime their market value is lower than his inter value. Once the market condition is changing, and these type of stock have been looked good by investors, their value will upward quickly, and extra return will been gained.According to Efficient Market Hypothesis, the extra return cannot be existed. There are many explains for the extra value. We may conclude those explaining into three main theories. For the one part is Overreaction Hypothesis. This theory is put forward by De Bondt and Thaler, these point out that the extra is come form overreaction of stock price. For the second part is Fama's Risk-adjusted Hypothesis. They acknowledge the different return between value stock portfolio and growth stock portfolio, but they think the difference is caused by the different risk in the two portfolios' testing period and building period, or is because of the unilateral of traditional CAPM model. The third part is Zarowin's research, he isn't approval that overreaction is the reason of value stock portfolio outperforming growth stock portfolio, he explain it by different company size of portfolio.Base on the shanghai security market total issuing A share froml 995.6-2002.6, our paper research the market exhibition of taking and holding value stock portfolio and growth stock portfolio for one year by B/M and E/P strategy. The main conclusion is shown as follow: firstly, value stock portfolio significantly outperforms growth stock portfolio in the testing period, and the performances of both portfolio take on a reversal pattern. The result is consistent with the Overreaction Hypothesis. Secondly, the empirical results show no supportive evidences for Risk-adjusted Hypothesis. Finally, the empirical study shows no approval evidence for Size Effect.