The Application of Price-Earnings Ratio in Hong Kong Hang Seng Index Futures Trading Strategy

Recent years, affected by the international situation, the volatility of Hong Kong stock market has increased, and investors face higher risks while having more opportunities. Whether the Price-Earnings ratio (P/E ratio) can not only be able to predict changes in stock market, but also formulate speculative strategies has been one of the research hotspots in recent years. But there is still a research gap in the use of the P/E ratio on the feasibility of HK stock market. Therefore, this paper constructs an investment strategy based on the P/E ratio indicator and uses R language to simulate the historical data collected by the Hong Kong Hang Seng Index and its P/E ratio in the last 5 years. According to results, the average success rate of this strategy reached more than 60%, of which the nearest quarter reached the highest success rate of 67.07%, indicating that the strategy is feasible. This means that this strategy can provide investors with a basis for investment decisions to obtain higher returns by mining the predictive role of the P/E ratio in the investment field.