The Relationship Between Listed Company Profits And Stock Prices

After two or three decades of development,Chinese stock market has become increasingly important.Research on Chinese stock market has always been an important direction for domestic financial research.The relationship between stock prices and the profitability of listed companies has also been a hot topic in academia.The correlation between earnings and stock prices can be used as an indicator of the maturity of the stock market,and it is also an important reference for investors to invest.This article uses the sample data of all Shanghai and Shenzhen listed companies except financial industry listed companies and ST companies from January 2005 to May 2019,and uses the partial least squares method to extract new comprehensive profit level variables from eight profit related indicators.In addition,the empirical analysis of the correlation between the comprehensive profit level factor and the cross-sectional return of the stock is made using the portfolio analysis method and the Fama-Macbeth regression analysis method.Judging the relationship between earnings and stock price from the predicted effect of earnings on stock returns.The research results show that: 1.Using the partial least squares method to extract the constructed comprehensive profit level factor has a significant effect on the prediction of stock cross-section returns,and can pass different settings of the robustness test to obtain the stock price and the listed company's profit There is a significant positive correlation between the conclusions.2.During the period of abnormal stock price fluctuations,the correlation between earnings and stock prices deviates.3.After 2016,companies investing in the top 10% of return on net assets in the stock market can obtain higher annual average returns than before 2016,indicating that investors pay more attention to the net profits of listed companies after 2016.4.Compared with the amount of profit,the market pays less attention to the quality of the profit of listed companies.This article also calculates the period-adjusted price-earnings ratio of the Shanghai Composite Index.And using the calculated period-adjusted price-earnings ratio to make predictions on long-term market returns and make judgments on long-term market risks.Based on the empirical results and the actual situation,this paper proposes a series of suggestions for market regulators to improve the existing capital market system,open short restrictions,expand the size of the stock market,and timely launch an IPO registration system to guide the optimization of investor structure.Mature stock markets are in line.It proposed a series of suggestions for investors to change their investment style,adhere to value investment,pay attention to the quality of listed company profits,and use partial least squares to construct investment portfolios.