Potentiality in Valuation: PB-ROE Decoupling and Event-Based Trading Irrationality in the Chinese Retail Market
Year: 2025
Type: article
Abstract: The current paper is an empirical investigation into the PB-ROE connection and event-related dynamics related to valuation in the Chinese retail industry based upon 2021-2025 samples of 10 A-listed firms (five leaders, five distressed). The results indicate an impressive dichotomy: the correlation between PB and ROE is high and positive among leaders (r=0.68), which reflects the traditional theory of valuation; in case of distressed firm, however, the correlation is negative and significant (r=-0.29) due to speculative distortion. Negative episodes cause 4x bigger PB drops in troubled companies ( -12.7 % vs. leaders -3.2 %), whereas false-positive (e.g., unconfirmed restructurings) events induce temporary bubbles, as could be the case with Dalian Friendship (the firm has a 73% PB rise/fall). Importantly, there is critical compatibility between leaders and semi-strong market efficiency as distressed firms are shown noise trader dominance, which disapproves the assumptions of EMH. We will suggest the use of the Event-Adjusted Valuation Model (EAVM) of event authenticity, intensity, and persistence in correcting the emerging-market mispricing that will give a guide to the investors not to fall into speculative trappings in fragile institutions.
Author: Yujie Huang
Institution: University of Indianapolis
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4414478242
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