Empirical Evidence Of The Relationship Between Intrinsic Value And Market Value Of SSE 50

As China's capital market experiences explosive growth, the total market value of Shanghai and Shenzhen stocks exchanges has ranked among the top tier globally. However, the growth has been accompanied by constant questioning of bubbles due to the frequent fluctuation of market values resulting from the high volatility of A shares. In the development toward a mature capital market, the focus on the intrinsic value and the relationship between the intrinsic value and market value has become a major trend in analyzing Chinese listed companies.This paper has adopted a balanced research approach that combined theoretical reasoning and empirical evidence. The paper started with the features and objectives of listed companies that set the background of discussions of company valuation theories, evaluation of stock valuation models. At last the paper also presented its unique stock valuation model. The paper has chosen the sample of SSE 50 which represents the blue-chip companies that are reflective of China's macro-economy changes. The paper divided the sample into three sectors based on the industry features, namely financials, basic materials and others. Discounted cash flow method and P/E based method were used to determine the intrinsic values of such companies. Empirical analysis was then performed to analyzing the relationship between the intrinsic value and market value of these companies.In conclusion, the paper demonstrated that the market values of listed companies are ultimately determined by the intrinsic values. The conclusion will have help listed companies evaluate their own values, be instructive in their value management and at the same time creating social values.