Abstract
Patent, a legal representation of innovation achievement, is strongly meaningful for almost every country’s economic growth and technology development. China, the world’s no. 2 stock market, is the world’s largest patent application country. In this study, we observed 2,197 China-listed companies of Renminbi (RMB) common stocks (A-shares) from 2016 to 2018. The relationship among 570 valid patent indicators and financial indicators of the stock price, Return-on-Assets (ROA), and Return-on-Equity (ROE) was examined. We constructed patent leading indicators, patent kernel indicators, and patent prediction equations for predicting the stock price, ROA, and ROE using the Granger causality test and the dynamic time series forecast model. The stock performance of investment portfolios based on patent prediction equations was thoroughly discussed. We found that investment portfolios constructed by the higher predictive ROA, the higher predictive ROE, and the higher predictive stock price growth rate have better performance than the A-shares’ average. The underlying concept behind this study is that despite the overall economic environment fluctuation and the China-US trade conflict, the patent-based algorithm proposed was proved to be useful to discover good investment portfolios.
Highlights
Global economic growth seems to be losing momentum in 2019
When the GDP of China surpassed that of Japan, China became the second-largest economy in the world since 2010. e value of China stock market
Against the backdrop of the China-US trade conflict, do the patent indicators proposed by Chen et al [3] hold good in leading the stock price? Do patent leading indicators work to correctly predict other financial indicators? Do patent-based stocks still perform better than the market trend? is study aims at answering the above questions
Summary
Global economic growth seems to be losing momentum in 2019. Productivity growth has recorded a decline, trade wars continue, and economic uncertainty remains high. Stock codes of the Shanghai main board start with 600, 601, and 603; most stocks are of state-owned listed companies and big companies. Stock codes of the Shenzhen main board start with 000 and 001; most stocks are of state-owned listed companies and big companies. E patent leading equation for predicting the stock price by patent leading indicators was proposed It seems that under the normal macroeconomic environment, the investment portfolio selected based on the higher predictive stock price return rate performed better than the market trend. Against the backdrop of the China-US trade conflict, do the patent indicators proposed by Chen et al [3] hold good in leading the stock price? Against the backdrop of the China-US trade conflict, do the patent indicators proposed by Chen et al [3] hold good in leading the stock price? Do patent leading indicators work to correctly predict other financial indicators? Do patent-based stocks still perform better than the market trend? is study aims at answering the above questions
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