| The Efficiency Market Hypothesis (EMH) on Stock Market is evergreen discussing focus in financial field, which has been coming into academician's eyes for nearly one hundred years. According to EMH, it is impossible for any investor to get risk-adjusted anomalous return for a certain long period. The Value Contrarian Investment Strategy (VCIS), which has been used by investors for over seventy years, and has been proved significantly in economic terms, take a great challenge to EMH. At the same time, there is not a consensus between academicians on the reason why VCIS can bring in anomalous return.The purpose of this dissertation is to address the two following research proposals: firstly, is there any significant anomalous return produced by VCIS in China stock market, which has been proved in US Stock Market; Secondly, what is true reason behind this significant anomalous return, the reason may be risk premium or investor 's systematic error pricing, or both? Finally, the author make an attempt to improve existing asset pricing models.The author adopt several update financial econometrical methods to carry out above-mentioned research proposals, please see the details in the following.hi Chapter Two, firstly, the author find significant size effect. Secondly the author evaluate the anomalous return produced by three- year-holding, two- year-holding , one- year-holding VCIS ,including equal-weighted and value- weighted, in the most popular Buy-Hold Average Returns (BHARs) and Average Monthly Returns (AMRs)term advocated by Fama(1998). The conclusions drawn from two methods are same: VCIS is effective investment strategy and can produce significant anomalous return, but the statistic significance from the latter is larger than that of the former. Based on the finding, the author construct a very successful investment strategy, the indices of which is stock capitalization and B/M factor. In additional, the author evaluate the anomalous return produced by VCIS, including equal-weighted and value- weighted, after controlling stock capitalization. Finally the author evaluate the anomalous return produced by VCIS in January and February .In Chapter Three, the author adopt conventional risk indices including σp, Bp andFull Range, and such portfolios management evaluation ratios as Jenson's Alpha , Treynor Ratio and Sharpe Ratio to evaluate risk-adjusted investment performance and relevant risk indices of Value stock portfolio and of Glamour stock portfolio in Buy-Hold Average Returns (BHARs) and Average Monthly Returns (AMRs) term. The conclusions drawn from two methods are same: VCIS is good and can produce significant final result, but the risk calculated from the latter method is larger than that of the former. This is one of source of divergence between LSV (1994) and Fama(1995) on the reason why VCIS can bring in anomalous return.In Chapter Four, the author adopt the ideas of LSV (1994) to test the naive Exploration Hypothesis. The conclusions drawn from it are that there is clear investor's tendency of overdue Exploration of past performance. In addition , the author find that the two indices :C/P and E/P are not valid indices to distinguish Value stock from Glamour stock, and two-dimension indices have better ability to distinguish Value stock from Glamour stock than one -dimension indices ,which is same as LSV (1994) .Finally, the evidence of return mean-reverting from this chapter support the ideas of DeBondt& Thaler (1985) on stock overreaction.In Chapter Five,, the author adopt new risk indices to construct multi-factor models to explain the anomalous return produced by VCIS. The new risk indices include B/M factor size factor coskewness and cokurtosis. The conclusions drawn from it are that: CAPM has not any ability to explain the anomalous return produced by VCIS; Fama-French three-factor model has the most significant ability to do so. It is noted that ,after including coskewness, the four-factor model has a greater significant ability than that of Fama-French three-factor model. Af...
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