Research, Valuation And Performance-based Stock-picking Strategy Effectiveness

China's stock market has been developing for 20 years. It not only became an important part of our national economy, but also the topic that our investors talk about in daily life. How we can get the excess returns from the stock market have become the most important content that investors are most concerned about. In a mature, healthy stock market of Western countris, the theory of value investing has become an important investment strategy which can bring stable rate of return and factors of stock returns to provide a theoretical basis. Given the importance of the theory of value investing, this paper tries to analyze the relationship between the stock market excess returns and valuation indicators theoretically and empirically.This paper aims to explore the impact of excess stock returns of factors, looking for ways to predict stock returns over the valuation indicators. The econometric methods and statistical methods are used to multiple regression analyze the relationship between the selected indicators and stock in a cross-section point. For the study,this article summarizes the essence of value investing theory and the valuable experience of many investment gurus to select 19 financial indicators and 4 market performance indicators. Subsequently, the three-pronged empirical researches begin. Firstly, we will use regression analysis to analyze relationship between the excess returns of stock and the indicators of stock from 2006 to 2009; Secondly, in different industries, we aslo will use the method of regression analysis to analyze relationship between the excess returns of stock and the indicators of stock. Thirdly, as for the listed companies which have different operating and financial condition, statistical methods are used to analyze relationship between the excess returns of stock and the indicators of stock. After the study, the conclusion shows that the indicators of stock contribute to excess return on the stock and can help investors choose the right investment strategy.