Discussion of valuation of china s stock market mispricing of earnings components chuan yang hwang
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Discussion of “Valuation of China’s Stock Market: Mispricing of Earnings Components” Chuan-Yang Hwang . Summary. Separate Earnings of China’s stock market into Core (CE) and Non-core (NCE) components. CE is more persistent than NCE as expected.

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Discussion of valuation of china s stock market mispricing of earnings components chuan yang hwang
Discussion of “Valuation of China’s Stock Market: Mispricing of Earnings Components” Chuan-Yang Hwang


Summary
Summary Mispricing of Earnings Components”

  • Separate Earnings of China’s stock market into Core (CE) and Non-core (NCE) components.

  • CE is more persistent than NCE as expected.

  • Investors underreact to CE and overreact to CE.

  • A profitable trading strategy can be constructed by long stock with hihg CE and short stocks with low NCE– Chinese stock market is not efficient.


Comments 1
Comments (1) Mispricing of Earnings Components”

  • Gongmeng Chen, Michael Firth &Daniel NingGao (2011):The Information Content of Earnings Components: Evidence from Chinese Stock Markets, European Accounting Review

  • This paper show exactly the same results listed in the summary.

  • It has somewhat longer data 1995-2008 (1995-2005 in this paper).

  • It also examine the mispricing related to ownership (private firm vs. SOE).


Comments 2
Comments (2) Mispricing of Earnings Components”

  • In Table 5,

  • Would the results hold with the following specification?

  • The t values in pooled regression are overstated, should use cluster standard deviation to calculate t valued

    .

  • To differentiate from the publish paper, consider studying how your results depend on information environment (such as firm size, analyst coverage).


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