| After twenty years'development, the A-share stock market of China has achieved great success. However, compared with the mature western markets, there are still many problems occurred in our market, such as: the abnormal high proportion of individual investors, insider trading, severe speculation, rare financial products and the shortage of effective risk prevention tools. Therefore, the Shanghai and Shenzhen A-share stock markets are not effective market, momentum and contrarian anomalies exist.For the past few years,'momentum'and'contrarian', as confusing stock market anomalies, have become hotspots in the financial study. Empirical study on the phenomenon and research on the forming mechanism directly drive the development of securities market's microscopic theory and behavior financial theory. According to behavior financial theory,'momentum'reveals the hypo react of stock price to information, while'contrarian'reveals overreact. Study about the existence of these phenomenon helps to verify the effective market hypothesis, on the other hand, it also helps to guide the investors to choose more effective invest strategies to get arbitrage according momentum or contrarian investment strategy. Accordingly, the study on the'momentum' and'contrarian'anomalies not only has significant academic meaning, but also makes great sense in the real stock market.The paper fully discusses the phenomenon and its influence and reason of Shanghai and Shenzhen A-share stock markets from both aspects of theory and empirical, systematically compares the abnormal phenomenon and its influence factors, and proposes suggestions on the market exchange mechanism and investor behavior based on empirical study. The content include: 1. Take the two A-share stock markets - Shanghai and Shenzhen– as two separate study units.To keep the consistency of stock valuation model and the sufficiency of study sample in the Shanghai and Shenzhen A-share stock markets, and to avoid the influence of market otherness caused by the non-tradable shares reform, this paper selects the market data from 1st Jan 1997 to 30th Apr 2005 in the Shanghai and Shenzhen A-share stock markets as study object, to study the significant profit model on momentum or contrarian strategy on the basis of 6 ranking periods cross arrange with 6 holding periods. 2. Take market factor and characteristic of individual stock factor as two basic dimensions and test the momentum and contrarian profit models affected by other different factors. Moreover, compare the behave discrepancy of the two markets'anomalies under affection of different factors to further investigate the profit model of market momentum and contrarian character with various market factors and characteristic of individual stock factors added. 3. Based on the first two steps and combined with the fruit of foreign study and the character of Shanghai and Shenzhen market, this paper filters 10 factors to measure the object stocks, using the sensitivity analysis of Fama-Macbeth model. The process is that: do one factor sensitivity analysis separately on the ten factors of Shanghai and Shenzhen markets at first, to filter more sensitive factors to do two-two factor sensitivity analysis. Moreover, filter again and choose again to do three-three factor analysis. We use Fama-Macbeth model to study the cross-sectional risk factors, and momentum and contrarian strategies'profit, to find the sensitivity factors that influence the profitability of momentum strategy in Shanghai and Shenzhen A-share stock markets. Finally, we separately test the effect of market risk, size and book-to-market value of equity through Fama-French three factor models in Shanghai and Shenzhen markets. 4. Considering the micro-mechanism of the securities market, we choose the Hasbrouck Model. We analyse the asymmetric information included in the real-time bargaining price of the target stock. We also do research on the relations between the private information known to the informed investor, and the momentum and contrarian anomalies of the stock price in the Shanghai and Shenzhen A-share stock markets. Furthermore, the asymmetric information of the stock price in the Shanghai and Shenzhen A-share stock markets, and the reason of it, are compared and analysed. 5. We divide the investors into informed investors and uninformed investors from the investor behavior aspect and analyze the conservatism and representataiveness heuritic through investor psychological model to further expound the influence on stock market anomalies that investor behavior manner exerts. At same time, we discuss the trade strategies of the two investors under situations of symmetric and asymmetric information from game theory aspect, and analyze the form mechanism of momentum and contrarian effect in Shanghai and Shenzhen A-share stock markets.The main conclusions of this paper are as follows:Firstly, under the precondition of different ranking periods cross arrange in pairs with different holding periods in the A-share stock market, the profit effect of momentum strategies are linked much with contrarian strategies. Both the Shanghai and Shenzhen markets register as momentum win in short-term, contrarian win in middle-term and momentum win in long-term. Moreover, both markets reflect the phenomenon that'the winner will always be a winner, and the loser will always be a loser', and'buy when it is going up, sell when it is going down'. However, the Shenzhen stock market appears stronger momentum win than Shanghai.Secondly, the earning yield of Shanghai and Shenzhen A-share stock markets is affected by different market factors and individual stock characteristic factors, while individual stock characteristic factors have significant effect. The reactions of Shanghai and Shenzhen A-share stock markets affected by different factors are the same, while Shenzhen appears a stronger momentum return character.Thirdly, the paper analyzes the sensitivity factors that affect the profit of momentum strategy in the A-share stock market through Fama-Macbeth model and find the common factors affect stock yield in Shanghai and Shenzhen A-share stock markets are effect of outstanding stock market value and price effect. The turn effect has great influence on stock yield in the Shanghai market while in the Shenzhen market volume effect and turn effect both have great influence. On the other hand, we find bate, which is market systematic risk, has significant negative effect on the average stock yield in Shenzhen A-share stock market. However, the influence in Shanghai is not significant, which indicates a higher market risk in Shenzhen.Fourthly, when we do the test of Fama-French three factor model in Shanghai and Shenzhen stock markets, we find that effect of size and effect of book-to-market value of equity have significant influence in both Shanghai and Shenzhen markets. The test further testifies that although both markets have effect of book-to-market value of equity, the size effect has more notable influence. In addition, the empirical study of three factor model also shows that Shenzhen market bears a higher market risk compared with Shanghai market, and the influence of book-to-market value of equity is lower in Shenzhen.Fifthly, we take Hasbrouck model to discuss the form mechanism of momentum and contrarian anomalies in Shanghai and Shenzhen A-share stock markets from the aspect of information spread pattern and find that private information held by informed investors is an important factor that causes the anomalies. Affected by the investor structure's particularity, the result of market trade information in Shanghai and Shenzhen A-share stock markets shown by Hasbrouck model is a dumbbell shape with both ends dissymmetrical. It is said that the proportion of stocks that contain a lot of trade information is much less than the proportion of stocks that contain little. The empirical result differs from the Hasbrouck test result on the USA New York exchange market, which shows a spindle shape with few figures spread in the two ends and most centralize around the average. This result explain the phenomenon of severe asymmetric information and banker stock in Shanghai and Shenzhen A-share stock markets compared with mature stock markets. In addition, it show that the investment skills and research levels of investors in china stock markets is still juvenility. They even more fall over theirself for profit by private information, and it is one of reasons which leads low degree criterion in our markets than other country's developed stock markets.Sixthly, we find the investors'behavior in accordance with conservatism and representataiveness heuristic in Shanghai and Shenzhen stock markets, which explain the reason for momentum and contrarian from the investor psychology aspect. From the aspect of investor behavior, in Shanghai and Shenzhen A-share stock markets which most investors are individual investors, the bankers cheat in the gaming with private investors and private follow the bankers are important reason for the momentum and contrarian effects in Shanghai and Shenzhen markets.The main innovative points are as follows:1. Take strict and normative empirical study for the first time to test and fully compare the momentum and contrarian anomalies in Shanghai and Shenzhen stock markets and find both markets have momentum and contrarian anomalies. The two markets have obvious linkage, while Shenzhen market appears a more stronger momentum effect.2. The different phenomenon of momentum and contrarian anomalies between Shanghai and Shenzhen A-share stock markets indicate that the two markets do not have the completely same operation character, and so the profit strategy is not absolutely the same. This paper compares the different operation character of the two markets and points out that the investors should take diverse investment strategy aiming at different strategy operation characters. This study fills the gap on the research of operation character in Shanghai and Shenzhen A-share stock markets.3. By using Hasbrouck model to test the asymmetric information contained in price and its influence through the analysis of stock price and volume, we find out for the first time that market trade information contained in the object stocks in Shanghai and Shenzhen A-share stock markets is a dumbbell shape with both ends dissymmetrical, different from the study result of the New York exchange market, which shows a spindle shape with most figures centralize around the average. The empirical result reveals the poor capacity to handle the information in our stock markets with most investors are private investors. They cannot positively get the information or process it. On the other hand, the result also reveals the fact that the bankers know the inside information of a few stocks through their fund and talent people and make profit from it. At the same time,the demonstration shows that the juvenility in china stock markets of the investors'investment skills and research levels is one of reasons which leads lower degree criterion in our markets than other country's developed stock markets. The investors even more fall over theirself for profit by private information.We make a positive attempt to extent the application of financial micromechanism theory.4. Compared with other research on the asymmetric information contained in stock price, this paper takes Hasbrouck model to study the asymmetric information in Shanghai and Shenzhen A-share stock markets, which is more completed and systemic, and avoid to take the simple and rough index—average percentage—to describe. This change improve the reflect capability of the study to the phenomenon. 5. Try to use investor psychological model to explain the reason for the momentum and contrarian anomalies in Shanghai and Shenzhen A-share stock markets from the aspect of investors'conservatism and representativeness, and also try to verify the model result by using the exchange figures actually happened in Shanghai and Shenzhen stock markets. The outcome further testifies the model of investor thinking has influence on the cause of momentum and contrarian anomalies in our exchange markets from investor behavior point.
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