Empirical Research On China's Stock Market Value Growth Investment Strategy

With the development of China's stock market,the institutional investors become the leading force in the stock market. Market investment philosophy gradually shifts to the fundamentals-based investment analysis. The price of the stock depends on its intrinsic value and future growth.The core idea of GARP (Growth at a Reasonable Price) investment strategy is to buy at relatively low cost of high growth stocks. Its aim is to find a higher safety margins and potential for continued growth in the stock at the same time. The study shows that using GARP investing strategy has two potential benefits channels:(1) income of value returning, (2) income brought by the release of value growth. In this paper, we use GARP investment strategy in China's stock market for empirical research. Theoretically, it is able to promote and perfect the theory of value investing. Practically, it is able to further enrich the investment strategy of domestic stock market. So it has a certain reference value to institutional investors and securities researcher. In addition, the quantitative stock selection model will be applied to the GARP investing strategy, which can greatly enhance the efficiency of information.In this paper, we combined the book value and growth potential of stocks into one investment strategy by useing GARP investment strategy. In theory, it can be better in reflecting the intrinsic value of stock and thus we will have a higher return on investment. In this paper, we firstly structure a stock selection model under the simple standard. It's order is to do a preliminary evaluation of GARP investment strategy in China's stock market. And then we increase the analyst forecast data, so that the historical data can be transferred into real data. This paper also researches the difference of sub-industry and risk- adjusted returns. The result shows that compared to the value strategy (300 value) and growth strategy (300 growth) the GARP strategy has a clear asset. From the view of risk-adjusted returns, the sharpe ratio of GARP combinations are much higher than that of China's 300 series index. GARP strategy also has a better ability of Industry configuration, and can be able to grasp the rhythm of moving round the industry. What's more, this paper compares the GARP portfolio with consider sub-industry and the GARP portfolio with non-consider sub-industry. Study shows that the former's accumulated earning is significantly lower than the latter, same as the sharpe ratio.