Variable investment strategies for Chinese listed military enterprises: an empirical study based on double-market network analysis

ABSTRACT

As one of the industries that have been developing fast in the last few decades, it is found that the Chinese military industry presents a rapid growth in production market, while an opposite one in stock market. It is worth investing in the Chinese listed military enterprises which are stepping at a prosperous stage. However, how to reasonably select and invest them based on the ‘poor’ stock performance? To address this issue, this paper first proposes the multiple double-market networks and further derives the sealed and the open double-market network models. The disturbance analysis is carried out taking the military expenditure as the exogenous disturbance. Furthermore, the whole military industry and the individual listed military enterprises in China are empirically investigated. After that, the efficient, the inefficient, the relatively stable and the disturbed military enterprises can be recognized based on their network efficiency values. Moreover, a time-lag effect is found. A sharp increment of military expenditure may lead to the improvement of overall performance in the next year. Based on this, we give the variable investment strategies for investors to select the network efficient listed military enterprises and help them cope with the sharp changes of military expenditure.

KEYWORDS:

• Chinese military listed enterprise
• double-market network
• disturbance analysis
• military expenditure
• investment strategy

Acknowledges

This work was supported by the Natural Science Foundation of China (Nos. 72,071,176 and 71,561,026) and the Humanity and Social Science Youth Foundation of Ministry of Education of China (No. 18YJC900118).

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Notes

¹ Data comes from Wind database.

² The two enterprises excluded are LIGEANCE AEROSPACE TECHNOLOGY CO., LTD (000697.SZ) and BEIJING EMERGING EASTERN AVIATION EQUIPMENT CO., LTD (002933.SZ).

³ Detailed data is from Wind database.

⁴ In the rest of article, we use #1-46 to instead 46 enterprises.

⁵ * means once efficiency change after adding the disturbance variable in three years, and ** and ***mean twice and third.

⁶ #number is the order of the enterprise, standing for the corresponding one.

⁷ Original means SSDM points.

⁸ After means the SODM points.

⁹ △ means increase in efficiency per unit of military expenditure growth rate.

¹⁰ Gain% means increased percentage of military expenditure compared with which in the last year.

¹¹ The units are 100 million RMB.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [Nos. 72071176 and 71840001].