IJSRP, Volume 3, Issue 8, August 2013 Edition [ISSN 2250-3153]
The researcher would like to find out if the value investing methods work in the Shanghai Stock Exchange (SSE) or not, and if they do, then the research compared and identified the method which give the highest return for the SSE.
The secondary data used in this research were the fundamentals of companies listed in the Shanghai Stock Exchange A Share Index from year 2006 to 2011. There were total of seven selection methods in this study. Three stock selection methods were applied from the Benjamin Graham’s criteria, two selection methods were adopted from Peter Lynch’s criteria, and two selection methods were from Joel Greenblatt’s Magic formula. The stocks listed in SSEAI were filtered by these seven screening rules, and then equal-weight portfolios were set up with stocks which can pass the screening rules. The returns of portfolios were compared with market return.
This research found that the portfolios that created by Peter Lynch and Joel Greenblatt’s methods produced higher return than market in each year from 2007 to 2010, and the portfolios that created by Benjamin Graham’s method produced higher return than market in each year from 2007 to 2011, except eight portfolios had no stock and no return. The researcher also found that the returns of portfolios are not higher than the market returns in year 2006 due to the Chinese government launched the new policy for stock trading.