Variable investment strategies for Chinese listed military enterprises: an empirical study based on double-market network analysis

Abstract

ABSTRACT As one of the industries that have been developing fast in the last few decades, it is found that the Chinese military industry presents a rapid growth in production market, while an opposite one in stock market. It is worth investing in the Chinese listed military enterprises which are stepping at a prosperous stage. However, how to reasonably select and invest them based on the ‘poor’ stock performance? To address this issue, this paper first proposes the multiple double-market networks and further derives the sealed and the open double-market network models. The disturbance analysis is carried out taking the military expenditure as the exogenous disturbance. Furthermore, the whole military industry and the individual listed military enterprises in China are empirically investigated. After that, the efficient, the inefficient, the relatively stable and the disturbed military enterprises can be recognized based on their network efficiency values. Moreover, a time-lag effect is found. A sharp increment of military expenditure may lead to the improvement of overall performance in the next year. Based on this, we give the variable investment strategies for investors to select the network efficient listed military enterprises and help them cope with the sharp changes of military expenditure.