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Asian Journal of Information and Communications 12(1)
Asian Journal of Information and Communications 12(1)

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Asian Journal of Information and Communications

Patent implemented time series algorithm for building stock portfolios in China A-shares Yu-Jing Chiu et al.

  • Page:0
  • 2020-10-07
Patent, a legal representation of innovation achievement, is strongly meaningful for almost
every country’s economic growth and technology development. China, with the world’s
No.2 stock market, is the world largest patent application country. In this study, we
observed 2,197 China’s listed companies of common stocks (A-shares). The panel data
consisting of 570 valid patent indicators and the financial indicators including the stock
price, the price-to-book ratio (PB), and the price-to-earnings ratio (PE) of the A-shares
through 2016Q4 to 2018Q3 were examined. We constructed patent leading indicators and
patent prediction equations for predicting these financial indicators via the Granger
Causality test and the dynamic time series forecast model. We found that stock portfolios
constructed by the higher predictive PB growth rate, the higher predictive PE growth rate,
and the higher predictive stock price growth rate have outstanding performance than the
market trend. The underlying concept behind this study is that though the overall economic
environment fluctuated to decline and the China-US Trade conflicts, the patent
implemented time series algorithm proposed was proved to be useful to discover good stock
portfolios.

Keywords: stock performance, patent leading indicator, patent prediction equation, Granger
Causality test, dynamic time series forecast model, China A-share
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