Empirical Study On The Effectiveness Of Value Investment In China’s Securities Market

Value investment theory was firstly presented by Graham and Dodd in the book《Investment Securities》in1934. Later Philippe Fisher make a perfect complementwith it and Warren Buffett, Mario Jia Bili, also took it into practice. From theexperience of the United States and other mature stock markets, the value investmenttheory is always been examined every time the stock market bubble burst, when thestock market rising, it would be forgotten, or alienated speculative value until thenext bubble to burst.The investment theory in Chinese stock market has experienced alternatingreorganization concept, high-tech ideas concepts, and so on. When the valueinvestment was first introduced to China, many people thought that it was notsuitable for Chinese market. But there are some people think that as the Chinesesecurities market becomes more and more standardized, supervision is morestrengthen than before, the value investment theory has gradually formed in themarket. So this paper hopes to analyze the effectiveness of value investment inChina’s securities market, and test the value investment strategy is able to achieveexcess returns in China’s securities market or not.This thesis firstly reviews the origins and development of the value investment,then introduces the theory of value investing of domestic and foreign scholars. Then,choose value funds and growth funds which were established before2006to testwhether value funds can achieve more returns than growth funds.The empiricalresults show that: in bull and bear market environment, the performance of valuefunds beat growth funds; But in the shock market and in the entire study period, theperformance of the value of the Fund’s performance is worse than growth funds. Sowe can get a conclusion that the value investment in Chinese stock market is noteffective.Finally based on empirical results, we try to make recommendations toinvestors, listed companies and securities markets, hoping that our value investmenttheory would have an advance in the future market.