A Study on Bubbles Measurement and Bubbles Rationality in China's Stock Market

Using the Residual Income Model,the paper measures market bubbles at the beginning of each year from 1993 to 2006 in China's A-share market.According to the bubble analysis of American stock market,the bubble rationality in China's A-share market has been researched.The research results show that the intrinsic value of China's A-share market remained stable while stock price fluctuated greatly and frequently.At the same time,Stock price included many bubbles and diverged seriously from intrinsic value.They also show that stock market bubble can not be indicated sufficiently by stock index and P/E ratio.The Majority of bubbles in China's A-share market were abnormal bubbles.Stock price had began to regress to value foundation since 2001 while stock bubble shrank continually.Till the beginning of 2006,stock bubble became normal and investment value emerged,which,to a large extent,promoted the emergence of the big bull market in the early half year of 2006.