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@article{ART002477529},
author={Lee Kwang-Jae},
title={Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model},
journal={JOURNAL OF CHINESE STUDIES},
issn={1229-3806},
year={2019},
number={64},
pages={217-237},
doi={10.26585/chlab.2019..64.009}

TY - JOUR
AU - Lee Kwang-Jae
TI - Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model
JO - JOURNAL OF CHINESE STUDIES
PY - 2019
VL - null
IS - 64
PB - CHINESE STUDIES INSTITUTE
SP - 217
EP - 237
SN - 1229-3806
AB - This paper has empirically evaluated the chinese stock bubble during 2010∼2015, measuring the fundamental value (V) and PVR (price to value ratio) of listed firms on three chinese stock exchanges in Hong Kong, Shanghai and Shenzhen with residual income valuation model suggested by Feltham and Ohlson (1995). Along with the analysis of popular market multiples in investment practice such as PBR (price to book value ratio) and PER (price to earnings ratio), the difference of PVR distributions among those three stock exchanges will tell us whether the stock bubble exists in mainland China, and how serious it is now. The empirical findings are as below. Firstly, the average V of Hong Kong is 52.9% and 632.4% bigger than those of Shanghai and Shenzhen, whereas their PVR’s are much higher than Hong Kong’s by 16.8 and 15.1 times, respectively. This implies that very serious stock bubbles exist in mainland China, and the chinese stock on average is over-valued by 15∼16 times than Hong Kong’s. Secondly, the average PBR and PER of Shanghai are 4.86 and 4.477 times higher, and Shenzhen’s are also 4.55 and 4.484 times higher than Hong Kong’s, which still confirms the existence of serious stock bubble in mainland China. Finally, between two stock exchanges in mainland, Shenzhen stocks have been more bubbled than Shanghai stocks, especially in recent years of my test, during 2013∼2015, with an apparent increasing trend. My findings support the warnings from global consulting firms including Mckinsey that the stock and real estate bubbles in China could trigger a disastrous world financial crisis, and they may not be just over-spoken.
KW - Residual Income Valuation Model;Stock Bubble;Market Multiple;PVR (price to value ratio);PBR (price to book value ratio);PER (price to earnings ratio)
DO - 10.26585/chlab.2019..64.009
ER -

Lee Kwang-Jae. (2019). Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model. JOURNAL OF CHINESE STUDIES, 64, 217-237.

Lee Kwang-Jae. 2019, "Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model", JOURNAL OF CHINESE STUDIES, no.64, pp.217-237. Available from: doi:10.26585/chlab.2019..64.009

Lee Kwang-Jae "Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model" JOURNAL OF CHINESE STUDIES 64 pp.217-237 (2019) : 217.

Lee Kwang-Jae. Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model. 2019; 64 : 217-237. Available from: doi:10.26585/chlab.2019..64.009

Lee Kwang-Jae. "Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model" JOURNAL OF CHINESE STUDIES no.64(2019) : 217-237.doi: 10.26585/chlab.2019..64.009

Lee Kwang-Jae. Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model. JOURNAL OF CHINESE STUDIES, 64, 217-237. doi: 10.26585/chlab.2019..64.009

Lee Kwang-Jae. Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model. JOURNAL OF CHINESE STUDIES. 2019; 64 217-237. doi: 10.26585/chlab.2019..64.009

Lee Kwang-Jae. Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model. 2019; 64 : 217-237. Available from: doi:10.26585/chlab.2019..64.009

Lee Kwang-Jae. "Empirical Analyses of Chinese Stock’s Market MultiplesUsing Residual Income Valuation Model" JOURNAL OF CHINESE STUDIES no.64(2019) : 217-237.doi: 10.26585/chlab.2019..64.009