A Correlation Analysis Of Operating Performance And Stock Returns Of Chinese Listed Companies

With more than 20 years of development,Chinese stock market has made tremendous achievements both in international influence and in importance to the domestic economy,its investment scale and the number of investors had been expanding.By the end of 2015,Chinese stock market became the second largest market all over the world,the number of listed companies in China reached 2829 and its market capitalization was RMB 53.13 trillion.Chinese stock market not only expanded investor's investment channels and widened the scope for the funds but also provided important place for raising fund to thousands of enterprises and made a great contribution to the economic development of China.But,for stock returns which were the issue of most concern to stock investors,what factors determine its size?Stock,which is a kind of virtual commodity,is traded in the market.According to the law of value,the stock return is influenced by the price of the stock,and the stock price is determined by the intrinsic value of the stock,meanwhile the operating performance of listed companies determines the level of the intrinsic value of the stock.Therefore,the operating performance of listed companies is bound to determine the level of stock returns.Although Chinese stock market has made tremendous achievements in all aspects,it is not mature whether in terms of investment norms or regulatory system when compared with the capital markets in some developed countries such as Europe and the United States.The market specific performances were:countless retail private investors who lack of necessary knowledge and skills of investment and their investment idea was unstable,serious speculation,insider operation,inconstant in policy supervision system and so on.Under these circumstances,operating performance of listed companies in our country is still an important factor in determining the stock return rate and what is the relationship between the two?In addition,which financial indicators can refer to when investors make investment decisions?With these questions,this paper studies the relationship between operating performance and stock returns of listed companies in our country.This study is not only conducive to the majority of investors to make good investment decisions and beneficial to recognize the status of China's stock market at present,but may have the reference value regarding Stock market Supervisory department in the later policy making.This paper uses the method of principal component analysis to study the relationship between operating performance and stock retuns of listed companies in China.The principal component analysis,which can effectively convert multiple variables into uncorrelated principal components,is a good method for data reduction and data analysis.In general,the anterior principal components are contain most of the information about the original variables,so studying the relationship between dependent variable and the original variables can be transformed into studying the relationship between dependent variable and principal components.This method not only greatly facilitates the analysis and calculation of the data,but also does not reduce the effectiveness of the conclusions.Theoretically,it is hard to get effective conclusions because of having a large number of variables and existed multiple mutual linear and sequence auto-correlation between them in the paper research.But using the method of principal component analysis can avoid such kinds of disadvantages and greatly facilitates the study of the process in paper research.This paper takes all the listed companies of A-share market in our country as the research sample,and EPS,Net Assets Per Share,etc in the annual report as evaluation indexes of operating performance of listed companies.These 12 financial indicators,which respectively represent Profitability,growth ability,capital operation ability,debt paying ability and cash flow of the listed companies,fully reflect the level of operating performance of listed companies.Then,using SPSS and Excel statistical software,this paper made a deep research on the relationship between operating performance and stock returns of China's listed companies in the year of 2014 and 2015.Based on the above research logic,the framework of this paper is briefly introduced as follows:Firstly,based on the dividend discount model,financial information and financial valuation,and the residual income model,this paper described the theoretical correlation between operating performance and stock returns.Secondly,with the method of empirical analysis especially using the method of principal component regression analysis,this paper got the regression equation between listed companies operating performance and stock returns.Finally,with further comparison and analysis,this paper got the final conclusions.According to the research conclusion,this paper put forward the policy suggestions and finally the paper expounds the inadequate and future.