Risk Assessment Of GEM Listed Companies To Invest

As an important force for the allocation of economic resources, investment promotes economic growth and social development but in the meantime, its development is also influenced by the factors, such as risk and return. Risk is always accompanied by return, they are the core of modern investment theory and the actual factors which must be weighed against in making investment decisions. The formulation of portfolio theory lays the cornerstone of modern investment theory and the use of variance in statistics to measure risk creates uncertainty analysis of investment risk. Currently, the concern about the investment risk is emphasized primarily on its assessment. This very assessment is conduced to establish profound understanding of investment risk so that we are able to discover how the different risk factors exert great impact on investment risk. Therefore, the evaluation and assessment of investment risk can not only promote the construction of capital market but also play a central role in investment, develop and consolidate the national economy and further create a sustainable, healthy and rapid guidance which would exert a positive influence within its mechanism.Up to now, fruits on the investment risk evaluation always select financial indicators as evaluation index and the methods they used are mainly based on linear assumption between the inscape of risk and investment risk. However, the strength and direction which risk factors acting on the investment risk is not a simple linear relationship but actually complex and changeable. In view of this, we try to construct investment risk evaluation index system of listing Corporation in Gem from three aspects among macroeconomic risk, market risk and the internal risks of listing Corporation. At the same time, in order to overcome subjectivity, fuzziness and linear evaluation in evaluation process, this paper selects the catastrophe progression method with the characteristics of objectivity and the ability of nonlinear approximation in evaluation process.After a theoretical and empirical analysis, the conclusions will be drawn as follow:First, the assessment of investment risk is to establish the mapping relationship between the inscape of risk and the status of investment risk whereby the impact exerted by these risk factors on investment risk could be measured so that the profound understanding and accurate rules of investment risk could be gained. Second, based on37risk indicators that comprehensive constructed in theory and the extraction by the principal component analysis method in mathematical logic, the evaluation index system could demonstrate investment risk of listing Corporation in Gem by macroeconomic risk, market risk and the internal risks of listing Corporation with the indications of the index of16including gross value of industrial output and consumer price index in region, etc,. Taking into account attributive diversity, structural complexity, linkage effect, non-linear mechanism and other characteristics between the inscape of risk and investment risk, the catastrophe progression method with the characteristics of objectivity and the ability of nonlinear approximation should be established. Third, based on the sample data from Toread, Lummy and other12listing Corporations, the result of model quantification and the factors analysis of the criterion layer showed that:(1)The innovative ability, the managerial capacity, the debt-paying ability, the profitability and other factors within listing Corporation are the primary factors affecting investment risk of listing Corporation in Gem (nearly the level of43.4%), which indicates that investment risk of listing Corporation in China Gem has the characteristics of endogenous dependence.(2)If the external risk is not considered, the impact exerted by innovative ability and the managerial capacity on investment risk reaches the level of35.81%, which shows that the non-financial risk has become an important part of investment risk of listing Corporation in Gem; The impact exerted by the debt-paying ability, the profitability, the operation ability and the growth ability reaches the level of61.18%, which shows that the financial risk is still the most significant force affecting investment risk of listing Corporation in Gem.(3)The impact exerted by macroeconomic factors and market factors on investment risk reaches the level of35.81%, which shows that investment risk of listing Corporation in Gem is excessively affected by external force. It goes against the system of modern enterprise and the spirit of contract so that further deepening reform has to be implemented.(4)The comprehensive score and ranking of listing Corporation in China Gem show, as to the amount of investment risk, that there is a distinctive regional difference between the south and the north.(5) The volatility analysis of investment risk of listing Corporation in Gem shows that the impact of macroeconomic factors and market factors on investment risk is more volatile and not stable; The impact of internal factors of listing Corporation on investment risk is more persistent and stable.Based on the analysis conclusion, this paper argues that only through optimizing enterprise’s managerial capacity, strengthening innovative ability and reinforcing the internal control of the companies listed on GEM, establishing enterprise’s financial warning system in case of early risk, establishing effective supervision system to regulate the market order of economy, as well as rationally allocating economic resources and actively adjusting the industrial structure of market, could a effective way to avoid current investment risk in Corporation listed on GEM be sought.The assessment of investment risk about listed company is based on GEM in China. The innovations of this paper lie in the following three aspects:First, on the basis of predecessors’fruits and the actual conditions of company listed on gem in China, we construct a more comprehensive index system to complete the quantitative evaluation of investment risk in companies listed on gem, which makes up for the qualitative research of investment risk in the past. Especially, the design of the index system, this paper takes into account macroeconomic risk, market risk and the internal risk of listed company for the first time. Second, in the process of establishing evaluation model about investment risk for the companies listed on gem, this paper introduces correlation analysis and principal component analysis method so that the underlying indicators could be sorted objectively based on their relative importance and the objective evaluation of investment risk for companies listed on gem could be inplemented. Third, based on the normative analysis and empirical evaluation conclusion, the paper puts forward some measures to avoid investment risk of company listed on gem in China.Regrettably, due to the difficulty of collecting the statistical data and the deficiency of academic researches as well as my limit in academic study whether subjective or objective, there is still room for improvement. For instance, the unavailability of the data, lack of collecting the data and the usage indirect proxies to stand for the real indicators. All of my efforts need to be further improved as to the design of index system and the evaluation analysis.