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Does Patent Help to Build Investment Portfolio of China A-Shares under China-US Trade Conflict?

Author

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  • Yu-Jing Chiu
  • Kuang-Chin Chen
  • Hui-Chung Che

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.

Suggested Citation

  • Yu-Jing Chiu & Kuang-Chin Chen & Hui-Chung Che, 2020. "Does Patent Help to Build Investment Portfolio of China A-Shares under China-US Trade Conflict?," Mathematical Problems in Engineering, Hindawi, vol. 2020, pages 1-12, May.
    • Handle: RePEc:hin:jnlmpe:7317480
    DOI: 10.1155/2020/7317480
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    Cited by:

    1. Corvello, Vincenzo & Belas, Jaroslav & Giglio, Carlo & Iazzolino, Gianpaolo & Troise, Ciro, 2023. "The impact of business owners’ individual characteristics on patenting in the context of digital innovation," Journal of Business Research, Elsevier, vol. 155(PA).
    2. Chin-Yi Chen & Ching-Lin Chu & Hui-Chung Che & Hong-Wen Tsai, 2022. "Using Patent Drawings to Differentiate Stock Return Rate of China Listed Companies. A Study on China Patent Species of Utility Model Grant," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 12(4), pages 1-1.
    3. Guderian, Carsten C. & Posth, Jan-Alexander & Grob, Linus, 2023. "Investment decisions and passive portfolio construction utilizing patent analytics: A multi-case study on COVID-19 treatment technologies," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 66-87.
    4. Chin-Yi Chen & Ching-Lin Chu & Hui-Chung Che & Hong-Wen Tsai & Bo Bai, 2022. "Using Patent Drawings to Differentiate Stock Return Rate of China Listed Companies. A Study on China Patent Species of Invention Grant," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 12(3), pages 1-4.
    5. Liu, Dayong & Lu, Zhao & Wang, Guanying & Meng, Qiaoran, 2024. "A two-dimensional innovation activity factor and stock pricing: Evidence from the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 102-114.
    6. Hong-Wen Tsai & Hui-Chung Che & Bo Bai, 2021. "Innovation Continuity as Indicator for Observing Stock Return Rate in China Stock Market," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(5), pages 1-2.

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