The Relationship Between Stock Prices And Time Series Finacial Information

Change in stock price is influenced by many factors.Among these factors, it isfinancial information that could be acquired and used efficiently by investors.Therefore, it has been a hot area of research that whether financial information isvalue relevance to stock market price and which kind of financial information couldexplain the changes of stock price. However, Existing research pay more attentionto the relationship between current stock price and the current financial informationbut ignore historical information and forecast information. Due to that, this paperuse time series information to build the regression model between financialinformation and stock price in Chinese security market. The main purpose is toprovide more comprehensive and accurate stock evaluating suggestions and fill theresearch gap.This paper first draws the theoretical framework for the study of relationshipbetween time-series financial information and stock market price. After that, buildthe regression model of stock prices and current financial information and stockprices and time-series financial information respectively using pharmaceuticalindustry as sample. By analyzing the results, three conclusions can be made. Firstly,in Chinese stock market, it is possible to explain stock market price usingtime-series financial information. However, the explanation power is limited whichshowing that expect financial information, non-financial information such asmacroeconomic policy could also influence stock market price strongly. The valuerelevance of financial information should be increased. Secondly, comparing withhistorical information, current financial information and forecasting informationhave better value relevance to stock market price. Thirdly, when evaluating stockprice by financial information, the historical index of price earning ratio, the currentindex of earnings per share, quick ratio and operating profit growth rate and theforecasting index of earnings per share, liquidity ratio and net profit margin areimportant to investors.