The behavior of monthly returns was analyzed to be inconsistent with the random walk hypothesis, which implies market inefficiency in pricing securities. These findings are consistent with the previous empirical studies on emerging stock markets. In addition to that, there are a number of studies focuses on the test of Fama-French Three-Factor model in Chinese stock market. Chen et al. (2003) reported that, similar to U.S. stock market, there was an obvious effect of small size company in Chinese stock market. It indicates that there is a inverse relationship between of the rate of return and an increase in the relative size of a Chinese company.In conclusion, there are few researches in the international articles using Chinese data to analyze the factor influence Chinese stock price or examine the variables that drive equity values in Chinese environment. Therefore, a purpose of this dissertation is to make an empirical research whether the underlying economic behavior of stock valuation pertains in the new environment. Overall, what is expected is to find a certain association of earnings and book values with equity values of firms in China. Because in the developed markets, as already mentioned, earnings and book value can be used to predict firm value. Accordingly, both of the two factors should, to some extent, influence equity value in developing markets. Therefore, it would be useful to examine how the roles of recursive values (earnings) and adaptive values (book values) in the Chinese market differ from their roles in the developed world.