An Investigation on Factors Affecting Stock Valuation Using Text Mining for Automated Trading

Xusen Cheng, Danya Huang, Jin Chen, Xiangsong Meng and Chengyao Li
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Xusen Cheng: School of Information Technology & Management, University of International Business and Economics, Beijing 100029, China
Danya Huang: School of Information Technology & Management, University of International Business and Economics, Beijing 100029, China
Jin Chen: School of Information Technology & Management, University of International Business and Economics, Beijing 100029, China
Xiangsong Meng: School of Information Technology & Management, University of International Business and Economics, Beijing 100029, China
Chengyao Li: School of Information Technology & Management, University of International Business and Economics, Beijing 100029, China

Sustainability, 2019, vol. 11, issue 7, 1-17

Abstract: Predicted price-to-book value ratios (P/BV) are widely used for the valuation of listed common stocks. However, with the application of automated trading system (ATS), the existing indicators that are applied in the method are losing their effectiveness in the Chinese market. Combining qualitative research with the text mining method, this study explores and validates those ignored factors to improve the accuracy of the stock valuation. On the basis of the principal of the existing valuation method, we clarify the scope of the factors that affects the P/BV ratio prediction. Through semi-structured interviews that are designed with six first-level factors which are taken from the literature, we then excavate some second-level factors. After that, with three corpuses including samples form Sina.com.cn, Xueqiu.com, and CSDN.net, four first-level factors and thirteen second-level factors have been verified step by step through the Latent Dirichlet Allocation (LDA) model. In the process, two other new factors and three sub-factors are also found. Furthermore, based on the factor correlation that was found in a data analysis, a factor relationship model was built. The results can be used in a stock valuation in future work as the basis of the indicator system for the prediction of P/BV ratio.

Keywords: Automated trading system (ATS); stock valuation; P/BV ratio; the LDA model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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