Research On The Responsiveness Of Chinese A-share Market Pricing To Future Earnings

After the stock market crash in 2015,the pricing effectiveness of the A-share market had been seriously reduced,and the stock pricing deviated from the fundamental situation of the company,making it impossible to effectively predict the changes of the company's future earnings.However,with the acceleration of the internationalization of A-share in recent years and the increasingly complete supporting system,the A-share's valuation system starts to move closer to the mature market,the mindset of high premium for small-cap stocks no longer continues,and the certainty premium starts to return comprehensively,and the rational trend of value investment is gradually taking shape.So in the current A-share market,can the stock price contain more information about the company's future earnings? By examining the future earnings responsiveness of stock price,this paper studies whether stock pricing in A-share market can effectively predict the change of the company's future earnings level.Based on the domestic and foreign literature,this paper constructs the future earnings response coefficient model with the corresponding A-share data,and analyzes the future earnings response of the selected sample stocks.The study found that both from the perspective of "Future earnings change-returns" sensitivity,or from the "Future cash flows-return" sensitivity,according to the relative small-cap stocks,the future earnings responsiveness of large-cap has more significant improvement,the future earnings responsiveness of small-cap and the whole samples at the same time also has significantly increased.That means in the A-share market,the stock price contains more information about the company's future earnings,the stock pricing can effectively predict the change of the company's future earnings level..Therefore,for investors,they should pay attention to the "certainty" enterprises such as leading industry,stable long-term operation and relatively perfect corporate governance structure,and establish the concept of value investment.For regulators,efforts should be made to improve the marketization of China's stock market system,strengthen investor protection and crackdown on violations,optimize investor structure and strengthen investor education.