Shanghai shares more predictive of corporate earnings, studies show

Research papers from the New York University Stern School of Business and the National Bureau of Economic Research have found that share price for stocks traded on China’s Shanghai exchange have become better indicators of future corporate profits, making the market something less of a casino than previously, The Wall Street Journal reported. Those findings were borne out by value investing strategies paying off last year, but according to the Bureau’s report share prices in recent years have given up some previous gains in predictive power, a loss the authors attribute to shadow banking pulling capital away from the stock market and mistrust among investors.