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The Studies On The Industry Momentum Strategies Based On The S&P/CITIC 300 Index

Posted on:2007-01-11Degree:MasterType:Thesis
Country:ChinaCandidate:H ZhangFull Text:PDF
GTID:2189360242962584Subject:Business management
Abstract/Summary:PDF Full Text Request
Momentum effect is a hot debate between Classical Finance Theory and Behavioral Finance Theory. Research on momentum can help investors acknowledge price behavior and make more effective investment strategies to acquire higher returns. This is important and significant for china's immature and burgeoning stock market.In this paper, we investigate into the industry momentum strategies based on the S&P/CITIC 300 index data from 1997 to 2004. The empirical findings confirm the significant plus abnormal profit of short-term industry momentum strategies, even including the factor of trading cost and risk. Especially, the industry momentum strategies have close relation with the stock market trend. The sensitivity of this momentum profit to the evaluation period is always lower than it to the holding period.Then, we discuss the source of the profit in the frame of Classical Finance Theory and Behavioral Finance Theory to guide investment in the future. In the frame of Classical Finance Theory, we improve on the model of Lo and Mackinlay(1990). The empirical results show that both the cross-sectional variation and time series predictability have significant contribution to the profitability of industry momentum. Compared with the foreign stock market, china's stock market shows bigger cross-sectional variation, which indicates that the risk of china's stock market is higher than foreign markets'. Based on the Behavioral Finance Theory, we analyze the behavioral characterize of the investors in china's stock market. We find that the Chinese investors have obvious over-speculation bias and herd behavioral bias. More importantly, the Chinese institution investors have the special bias of"Being the Banker"and the individual investors usually follow the banker.
Keywords/Search Tags:Momentum Strategy, Industry Portfolios, Behavioral Mistakes, Behavioral Finance
PDF Full Text Request
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