An Theoretical And Empirical Study On The Stock Price Momentum

Momentum effect is a hot debate between Classical Finance Theory and Behavioral Finance Theory. The existence of this anomaly challenges Market Effective Hypothesis. Classical Finance Theory explains it as rational risk compensation. But there is a lot of contradiction in experimental results. Research on momentum effect stimulates Behavioral Finance Theory's development very much. Behavioral finance models are based on cognitive mistake, which are more suitable to reality. But there are a long distance between fact and hypothesis. At the same time, research about momentum can help investors hunt for low-risk arbitrage, which are core of empirical industry.Most documents based ehavioral finance have a distance with stock market, for example the changes of trader's style. While domestic documents still debate whether there is momentum effect in Chinese stock market, but not exploit profits' resources.So coming from the real situation stock market, this dissertation mainly researches formation resources of momentum profit under the changes of trader's style, which develops behavioral finance model. Then using data generated by computer, this dissertation empirically researches our theory model. New results are found. The results are accordant with the fact of stock market. They confirm that the hypothesis is right. They also give new thought way for the research of momentum in Chinese stock market, and are valuable for empirical investment.The primary innovation in this dissertation is demonstrated as follow:1. This dissertation stud the change of trader's style.First show the example in reality, and then using the behavioral finance theory to explain the change of trader's style, and give four kinds of explanation.2.This dissertation changes and expands HS model's hypothesis. It is different from HS model from the traders' classification, in HS model the traders are divided into the news watchers and the momentum traders, but in this dissertation the classification is fundamental Analysts and momentum traders. Fundamental Analysts can see the present price, and have simple price forecast ability, and this is more accordance with reality than HS model, thus it plays a different role during the formation of the balanced price. It considers the change of trader's style, builds Momentum Effect Model under change of trader's style, which clearly characterizes stock price's movement track affected by news and directly describes momentum effect's size and direction affected by fundamental Analysts and momentum traders. This dissertation gives more model's empiricalimplications.