The Study on the Correlation between Price and Profitability of Chinese Stock Market

摘要

In the paper, the sequence correlation between stock price and return on net assets in China’s stock market is tested through the co-integration theory. The results show that there are co-integrating vectors in these two time series, which means the stock price has a longterm equilibrium relationship with the profitability of listed companies. This suggests that in the long run the overreaction hypothesis is not in conformity with reality in Chinese stock market.