The Research Of The Residual Income Model’s Explanatory Ability To The Listed Corporations On SMEs Board

When used residual income model to take empirical research in company’s shareprices, most scholars only studied the whole model’s ability to explain stock prices,while ignoring the different roles that each pricing factor in the model played on thecompany’s share pricing.The variable of the residual income in the residual incomemodel can reflect the characteristics of the company’s growth. In our country SMEsboard listed companies have high growth characteristics. Therefore, this article selectsthe residual income model to take empirical research on the SMEs boards listedcompanies in our country,in order to test whether the market recognizes the SMEsboards listed company’s characteristics of high growth or not. In addition, becausesecurities investment funds have the function of "value discovery" and "valuecreation", we use fund holdings as a substitution variable to replace "otherinformation" in the residual income model to test its role in the stock pricing.Linear dynamic information hypothesis is the core of the residual income model.So this article firstly test whether substituting fund holdings for the "otherinformation" in the model meets the linear information dynamic hypothesis or not.The result shows that, from2007to2011, the fund holding can exert a significanteffect on the residual income of the companies listed on SMEs board in our country,and its regression coefficient ranges between0and1, which met the requirement ofthe linear dynamic information hypothesis.After that, based on the theory of Information Perspective and MeasurementPerspective, and according to the different forms of residual income model, thisarticle build two different forms of empirical model, that including or excluding thevariable of fund holding. When testing the two different models’ ability to explainshare prices, we find that the ability of the model included with fund holding is higher,which shows that the fund holding has additional explanatory ability to share prices;meanwhile, we also find that, when the market set the share price in SMEs board, itwill put more emphasis on the variable of the residual earnings per share and fundholding.