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

Abstract

The prediction ability of patent indicators to earnings-per-share ratio (EPS) of 2,197 China A-shares (listed companies) in Shanghai stock exchange and Shenzhen stock exchange are discussed. The patent leading indicators and patent prediction equations for predicting future EPS were successfully constructed via Granger Causality test and time series regression. We found the stock portfolios selected by the patent-based higher predictive EPS had better performance than the market trend and the traditional higher EPS investment strategy. Especially, the higher predictive EPS growth rate worked well on GE Board though this stock board declined seriously.