The Comparative Analysis Of P/E And P/B Of Listed Companies

In China, stock investment has become one of the important options. P/E and P/B are significant financial indicators that are used to assess the products'quality in the capital market and the value of the listed companies. The analysis of the formation mechanism and interaction of P/E and P/B has an important part to find out the valuable investment portfolio, and to interpret the data information and the economic content of the indicators in the objective way, and to comprehend the financial mechanism of the companies.This paper makes the empirical research methods, and selects the annual indicators of P/E and P/B from the Shanghai and Shenzhen stock markets, from 2000 to 2007, and analyzes the general level of China's indicators, and finds out the industry distribution characteristics.This paper mainly includes five parts. The first part is about the introduction, to propose the issue. The second part is the literature review, and states the basic theories of the paper. In the third part, the course of selection of samples and data, as well as the research design are described in detail. The fourth part is the core of this paper.This chapter begins with the sample coordination, to analyze problems and test the empirical results, and summarizes the results at the end. Sample analysis shows that the risk of investment of the low P/E stocks is less than the high P/E stocks, and the profitability of the companies with low P/E is better. With the high P/B, if the P/E is also high, that means the higher cost of such investment in shares and more risks, and the value of the company is overvalued. On the contrary, if the P/E is low and P/B is high, that means the company's assets quality is in good, and the investment risk is relatively less. Investors have more optimistic expectations with such stocks. The investment portfolio of low P/E and high P/B is most valuable, while the investment portfolio of high P/E and low P/B is lest valuable,In addition, the financial indicators'effects in stock options are limited, it should be combined with the concerns of non-financial information, such as the prospect of the industry, the policy guidance, the company management, corporate governance structure, the operating strategy, shareholders'supports, sentiment index, and so on. Of course, the rational investors should primarily pay attention to the fundamental affects, the company's operating performance and profitability.The innovations of this paper are comparatively analyzing the P/E and P/B from a more integrated and comprehensive way, and proposing the of different P/E and P/B, and finding out the value of different portfolios.