Empirical Research On Momentum In China Stock Market

Purpose of this dissertation is to identify features of momentum effect and to discover reasons why it takes effect in China's stock market through empirical analysis.This paper examines price momentum and earnings momentum strategy in China's stock in detail. Empirical results show that price momentum strategy can't produce positive returns prominently in short term, especially holding the combination of"winners-losers"for 1 month. But holding the combination more than 3 month, we could get the return. So it means future returns can be predicted by past returns, focusing on historical price. However, Holding it for 18 month, the momentum return disappeared, which shows that past returns only have effect on future returns in medium term.Earnings momentum strategy performs better than price momentum, which benefits from the earnings news prominently. However, both of them can not produce returns in 1 month. Maybe it was affected by the choice of sample. In long term, past earnings surprise can predict future returns, and stock price regress the value gradually.At last, this paper inquires into reasons of momentum effect phenomena in China's stock market by multifactor model. As a result, the model can't explain the momentum effect phenomena exactly. Then, the paper tries to explain the phenomena by behavioural financial theory. The result admits under-reaction and over-reaction of the behavioural financial theory.