Irrational exuberance and stock market valuations: evidence from China

摘要

This paper evaluates the fundamental efficiency of stock market valuations in China. Utilizing a panel data set constructed by the author of all Chinese listed firms for the 1992-1999 period, this study finds that stock valuations in China deviate significantly from underlying firm-level fundamentals. Specifically, the worse that firms perform, the higher are their valuation ratios. Given the significance of the stock market for allocating investment funds in China, the findings from this paper suggest that China's stock market development might produce an inefficient resource allocation and cause detrimental effects on the real economy.