Research On The Multiple Value Regression Model Of Intrinsic Value Of GEM Stock

Since Chinese Growth Enterprises Market (GEM) was launched on October30,2009, the stock price of Chinese Growth Enterprises Market has stayed on a high volatility level. But with intrinsic valuation method’s development, the price-earnings ratio has been dropped from70to30, which tends to be stable. The Chinese Growth Enterprises Market investors have paid more attention on the intrinsic value of the Chinese Growth Enterprises Market stocks rather than on the technical factors. Therefore, how to build a good intrinsic valuation model of Chinese Growth Enterprises Market stocks has become a hot topic nowadays.In the current study, the most popular assessment to value the Chinese Growth Enterprises Market stocks intrinsic value is the relative valuation models, such as price to earnings, price to book ratios. However, the relative valuation models are too simple to be good valuation models. To make some improvement, some scholars tried to use NPV models, which are also not good models. Because the Chinese Growth Enterprises Market stocks often have great uncertainty of future earnings, we have to estimate the future earning if the NPV models are used. In addition, the Economic Value Added model and option models also cannot make a good valuation of the Chinese Growth Enterprises Market stocks due to the lack of detailed information.This paper attempts to establish Chinese Growth Enterprises Market stock valuation model using multivariate regression method. We try to find some effective factors from the corporate governance factors, shareholders’equity factors, financial indicators, growth indicators and innovation indicators. Then this paper will make some adjustments to these selected factors such as normalization, industry difference adjustment, positive handling, and multicollinearity removing. Then multivariate analysis model will be built up according to the data from2009to2011, and we will test the model from statistical level and investment level. Our ambition is to find some stable factors with great explanation power for the intrinsic value of the GEM stocks.