Based On The Price-earnings Ratio Of Stock Market Investors Are Expected To Study

This dissertation theoretically analyses investors' expectations based on price-earnings ratios in the background of China's stock market, then it shows us an empirical research of the effect of investors' expectations on P/E ratios, and to what extent China's stock market investors' expectations are accurate.People always estimates what the results would be when making decisions based on their experiences and information they get. Expectations can reduce uncertainties which people must face with, so it is very important for people's purposeful actions.Stock market investors make the best choice in favor of their interests based on expectations, great changes in investor's expectations will probably lead the market upset. Many problems in China's stock market have close relationship with expectation. Guiding to rational investors' expectations is indispensable for a well-rounded market.The importance of expectations in stock market represent firstly in its effects on stock prices. Price-earnings ratio can be seen as relative price of stock that has been adjusted for earnings per share; this gives rationale for P/E comparisons between different listed companies. The dissertation examines the cross-section structure of P/E ratio, focuses on the issue of China's stock market investors' expectations functions and how accurate these expectations can be.This dissertation examines the effects of investors' expectation on stock's price-earnings ratio. Based on the P/E model in which relevant variables are included, the author does a regression analysis using different types of data. The results reveal that investors' expectations about firm's long-term growth rate have the most powerful effect on P/E ratios, but P/E is not so sensitive to expected risk.This dissertation also makes an. on-the-spot investigation for the relationship of stock's P/E ratio and actual firm growth. Using non-parametric statistics approach, this paper examines the question of how accurate China's investors' expectations can be. The conclusion is that investors have a good understanding about firm's growth rate in a period which no more than three years thereafter, but P/E ratios does not reflect firm's longer future growth trend.The dissertation also gives corresponding advices in connection with conclusions and problems found in the empirical research.