An Empirical Study On The Validity Of PEG Index In China 's Growth Enterprise

PE is the ratio of the stock market price to its earnings per share, it’s often used as a reference index of stock investment. Combined with the actual situation of our country, the important feature of China’s GEM is the high growth, the PEG is a new index that based on growth, so in China’s GEM to examine the effectiveness of PEG for empirical research is significant both in theory and in practice.In the theoretical part of this paper, we first introduce some derivation methods of PE, namely the Gordon model, the NPVGO model and the EBO model. On the basis of the introduction of these models, the economic connotation of the PE has been described in detail, which shows that the PE has the value as an investment reference index. Then on the basis of the NPVGO model, the theoretical model of PEG is derived, and the conclusion that the yield is equal to the square root of the reciprocal of PEG is obtained. At last, it puts forward some suggestions on how to use PEG for investing, and puts forward the hypothesis.In the empirical part of this paper, we deal with TAG. NPG. MBRG of the three indicators by principal component analysis, obtaining the PEG in accordance with the bull and bear market. Then we used the research method of panel data of gem companies in accordance with the bull and bear market to carry out regression analysis, verifying the correlation of the returns ratio and PEG. The results showed that whether it is a bear market or bull market, PEG and the returns ratio showed significant negative correlation relationship, indicating that the lower peg stock can bring higher returns. Then this paper, according to the value of the PEG, we built three groups to investigate their return from 2010 to 2015. The results showed that the PEG group that value range of 1 to 0 was significantly higher than the PEG group that greater than 1 and negative PEG group. Finally, this paper uses the CAPM, the stock return rate of the relevant regression analysis, found that both in the bull market or bear market, the PEG group value of 0 and 1 get the highest excess returns. This once again proves that the strategy of investing in low PEG stocks is worth adopting.The conclusion of this paper is to clarify the conclusion that the PEG is the index of the effectiveness of China’s gem investment, and illustrates the limitations of this paper.