A Research On The Relationship Between Company Growth And Pe Ratio Of China Gem

Abstract:Based on the Progression Law of Sudden Change, this paper has constructed the Growth Influence Evaluation Index System for companies in GEM, which includes the growth potential indicator (PI) and growth reflection indicator (RI). Taking153companies in China GEM as the study samples, it has established a regression model constructed by growth index and a series of control variables in order to explain the GEM PE.The regression results further validates the judgment that PE ratio refers to the company growth in investment practice. It also discovers that the GEM valuation still focuses on the feedback from history performance, and there is rare growth potential information in PE ratio. This paper provides empirical basis to advocate for long-term investment, rather than short-term speculation.This paper finds that GEM valuation levels have not been regressed to a reasonable level; there remains high valuation speculative behavior under high-risk environment. It is verified that stock valuation is affected significantly by industry valuation, supporting theme and hot topics investment.The First Chapter of this dissertation introduces its background, significance, ideas and methods of the research. In Chapter2, the dissertation illustrates research results from GEM overview, company growth theory and valuation of GEM. In chapter3, it constructs the Growth Influence Evaluation Index System for companies in GEM based on the progression law of sudden change. In Chapter4, it establishes the Impact Mechanism Model, sets research hypothesis, and uses multiple regression method to analyze the relationship between GI and PE of GEM companies. In the last chapter, thedissertation systematically summarizes theoretical mechanisms and empirical results, and provides strategies and policy recommendation for investors and officials.This paper emphasizes that GEM should improve the investors’ educational mechanism timely, and actively guide investors to build the philosophy of value investment, in order to promote the efficiency of GEM. It also recommends security analysts to focus on the factors of potential growthfor companies.