An Empirical Test Of Two - Dimensional Value Investment Strategy Based On Financial Statement Information In Chinese Stock Market

Generally speaking, stocks with high B/M, E/P, C/P or D/P ratios are called value stocks.They are undervalued, their prices are under their intrinsic value. Vice versa, stocks with low such ratios are glamour stocks. Value investment strategy is longing value stocks and shorting glamour stocks at the same time, holding for a certain period to gain abnormal returns.This paper used empirical methodology and proved that for A shares from2006to2010, value investment has gained significant abnormal returns in both one-year and three-year windows. Furthermore, two-dimensional value investment strategy incorporating growth ability has been constructed. The return of this strategy has over passed that of value investment strategy in both one-year and three-year windows.The structure if this paper is as following:The first part is introduction, illustrating the reason to choose this topic.The second part shows both theoretical and practical development of value investment.The third part summarizes the formal papers on value investment, both in China and abroad.The fourth part is empirical part, demonstrates the data and empirical results.The last part is conclusion to the whole paper.