Abstract
Taking Shenzhen stock as an example, this paper explores the opportunity for high returns in the stock market through the study of the price-to-earnings ratio, and finally determines the optimal stock market decision. By trying different numerical value on the price-to-earnings ratio and calculating the total return based on historical data, it is obtained that buying when the price-to-earnings ratio is lower than 156 and selling when it is higher than 224.5 can get the highest return. However, in the following general study of high-yield decisions, it is found that all decisions are concentrated in the rapid rise in stock prices caused by “reform cattle” in 2015 in China. Therefore, in order to study more general strategies, the scope and difference of price-to-earnings ratio are redrawn and two feasible decision-making methods are obtained: risk-averse decision-making and risk-preference decision-making. Both two decisions are suitable in a relatively stable stock market, and can earn almost the same profit theoretically, so investors can choose any of them based on their preferences.