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Mean Reversion in the Cyclical Movement of Chinese Stock Market

DOI: 10.12677/ETW.2015.51002, PP. 10-15

Keywords: 均值回归,市盈率,成长率,中国股市
Mean Reversion
, PE Ratio, Growth Rate, Chinese Stock Market

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Mean reversion is the assumption that assets prices tend to fluctuate around mean value. This essay uses the average PE ratio as the indicator of valuation of Chinese stock market and analyzes its cyclical movement during 1993 and 2014. Our research indicates that mean reversion is effective in Chinese stock market. This essay also tries to forecast the market, using mean reversion as a tool, based on the historical data of PE ratio and growth rate of Chinese listed companies. It is estimated that Shanghai Index will rise to the range of 16,000 - 20,000, on the consumption that the current bullish market will last for 3 or 5 years.


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