Empirical Study The Effectiveness Of PEG Ratio In Chinese Stock Market

Although PEG Ratio has to be an important ratio in the practice of investment in Chinese Stock Market for a period of time, there was no empirical research on the efficiency of it. In this paper, we selected all the stocks of A share market, used the data from end 2000 to March, 2008, with the methods of categories, summary, statistics and hypo tests, etc., and also with the different assumptions for the projected growth of EPS, to analyze the efficiency of PEG ratio.From the research, we found that returns was significantly negative correlation with PEG Ratio from end 2005 to end 2007, and not significant from end 2000 to end 2005, and also not significant in the first quarter of 2008. We also found that G_T-3,T was more important than G_T in PEG ratio, especially for the long-term investment decisions. And in the short term analyses, generally G_T can gain more than G_T-3,T. Otherwise, we also compared the PEG ratio and PE ratio in the investment analyses, and found that they were all very important and can perform different in different situations, and it's risky to use just one ratio to do investment decisions.The innovation of the paper is that, it is the first time to test the efficiency of PEG ratio in Chinese stock market, it provide a basis for investors, and also can be used as a reference for the coming research.