A Research On The Intermediate-Term Return Trend Of Shanghai Stock Market

Past stock returns are predictive of their future returns. Researching on the monthly returns of "A" shares of Shanghai Stock Market, we find that both winners and losers in the past 1-12 months perform poorly in the intermediate future. Past winners tend to reverse, past losers show momentum, and past ordinary-performed stocks tend to have strong performance in the holding period.While exploring the courses of different intermediate-term return trends of Shanghai Stock Market, we find that the two-factor model can explain the return reversal of past winners; however, it can not explain the return momentum of past losers and the strong performance of past ordinary-performed stocks. We believe that investors' overreaction to good news and underreaction to bad news, together with the unique behavior of the banks in China stock market, may contribute to the different return trends of different portfolios.