An Empirical Study On The Relative Bubble Measure Model Based On Accounting Information

This paper focuses on stock markets bubbles that has been supposed to be a widely under-debate issue. We try to find a new path to solve the key point in absolute bubble measurement, that the intrinsic value of stocks can't be well defined. And we also hope to work out how to measure the extent of the stock markets bubbles. Based on the Residual Income Model, which is the most popular intrinsic value measure model in the field of finance and accounting in the United States over the past decade, and also well-recognized in the theoretical circle, we deduced Relative Bubble Measure Model to measure the bubble in the total market value, that is, relative bubble value. According to the relative bubble value, we give a general description of the stock markets, then compare with othe bubble index, such as P/E ,then we find the relative bubble value has more practical significance.We simulate the relative bubble value through the Relative Bubble Measure Model. Then we construct the zero-investment portfolio, two groups has 30 stocks of the minimum or maximum relative bubble value. We come to the return of these two groups. The results show that the minimum group yield higher. In the second step, we compare the minimum relavtive bubble group with minimum P/E group also on their return, and we find the former group performs better. Finally we compare the minimum relative bubble group with the whole stock markets, and find that the return of the former goes beyond the stock markets average level. In conclusion, the relative bubble has significant application in the stock markets.