Value Stocks Optimization Method And Its Empirical Research

With the development of China's stock market, the investing idea of investor is becoming mature. Value investing is becoming one of the most important kinds of investing methods. Value investing has got higher return in western stock market in many years. However, the study of value investing in China is just in the starting period. The study of value investing in the article is in order to get a method to choice valuable stock and help investor to choose the stock, which generates high return on investment with low financial risk.The basic value investing strategy is: measure the internal value of a stock by some methods of valuation, compare the internal value with market price and buy the stock which is undervalued relative to the market price. The method of valuation is very important to the value investing. Based on the efficient market and the fact of China's stock market, the article bring forward a method to choice value stock: (1) use price earning ratio and earning per share to found original model of valuable stock, choose stock with type character of valuable stock; (2) found internal value multi-factors model of valuable stock through regress analysis when the price of stock is reflected the fundamental; (3) use the model to account the internal value of valuable stock when the fundamental changed and choose the stock which is undervalued relative to the market price.Through the analysis of stocks in the 2003-2004 period, it could be found that the model can generate high return. The model is feasible on the actual application.