Patent-Based Predictive ROE on Increasing Investment Performance of China Stock Market

Abstract

2,197 China listed companies (A-shares) in Shanghai Main Board, Shenzhen Main Board, GE Board, and SME Board are discussed the prediction ability of patent indicators to A-share`s return-on-equity ratio (ROE). The patent leading indicators and patent prediction equations for predicting ROE are constructed via Granger Causality test and time series regression. The stock selection criteria by the higher predictive ROE and higher predictive ROE growth rate is proved to be useful to find valuable stock portfolios with better performance than the market trend. It also worked well on GE Board and SME Board though they were seriously impacted by China-US trade conflict.

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