Value Investment Strategy Empirical Research Based In China Stock Market

2010 is an important year for China's stock markets, the introduction of stock index futures, changed the history of China's stock pattern of unilateral market. At the same time, as the growth of institutional investors and the market continues to standardize, value investment strategy in China Stock Market finally become a reality. We know that in mature markets abroad, value investing has been the mainstream of the investment philosophy, and many masters who insist on value investing had made great success in the stock marker.According to the research of the value investment, people usually classify firms that have high ratios of book to market value (B/M), earnings to price (E/P), dividends to price D/P), cash flow to price (C/P) or sale revenue to price (S/P) as value stocks, and have low these ratios as growth stocks. The paper classifies all the A-stocks in Shanghai stock market as value-investing portfolio and growth-investing portfolio based on B/M,E/P,S/P and C/P ratios. And then it compares the profitability between value stocks and growth stocks to test the performance of value strategy, In this empirical study, the results show that value strategy is efficient in China stock market. During the sample years, the accumulative portfolios returns difference between value stocks and growth stocks based on B/M,S/P and E/P is obviously, but the accumulative portfolios returns difference between value stocks and growth stocks based on E/P is not notable.At last, the paper uses the Risk Adjusted Hypothesis and Overreact Hypothesis to explain for why value strategy performance better than growth strategy, and discovers that the premium can be interpreted by the Risk Adjusted Hypothesis but not the Overreact Hypothesis.Finally, in considering of the theoretical and empirical analysis results, this paper does a summary of the whole text, and puts up some recommendations and suggestions in accordance with the research results.