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The Comparison And Study Of Momentum Effect Of Shanghai And Shenzhen Exchange

Posted on:2009-03-26Degree:MasterType:Thesis
Country:ChinaCandidate:Q Y LiFull Text:PDF
GTID:2189360272481272Subject:Finance
Abstract/Summary:PDF Full Text Request
Efficient Market Theory is the most important and vastly influential theory in the financial economics. However more and more researchers began to doubt about this theory. Because there are more and more evidences that are against EMH. First, EMH believes that the investors are rational, so they always invest their money into the stocks whose prices are their true values. But researchers found that investors are not always rational. To the contrary, investors are always not rational. They are found sometimes overreacted to the news and sometimes underreacted to the news they got. Second, in empirical investment, people found the funds that took the relative strength strategy, that is to buy the relative strength stocks ,and sell the relative weak stocks in the same time, could got obvious abnormal profits. All these funds are not coincident with EMH. And EMH can not explain these. So people began to study about behavior finance.Momentum effect is the most known phenomena which is against EMH. Momentum effect means that stock price tendency will be lasting for a time. So zero-cost portfolio, what is buying the relative strength stock and selling the relative weak stock in the same time, can get obvious positive profits. Foreign researchers have being study about the phenomena for years. And they found momentum effect vastly exists in most stock markets. Jegadeesh and Titman(1993) first found momentum effect. They found in American stock market there is momentum effect in 3-9months. Then more and more people began to pay attention to the phenomena. People try to explain the phenomena from many respects. But the most accepted explanation is underreaction and overreaction theory.In our country, there are more and more researchers doing with this topic. They found in our country, momentum effect is not as obvious as in foreign countries. Totally speaking, in our country momentum effect exists in short time such as four weeks. This is because our market is new and not mature. Individual investors take the big portion of the investors, and the number of agency investors is little. So there are too many noise traders in the market. This leads to the frequent volatility of the stock price. But there are two independent and related markets in our country. Is there any different between the two markets? This paper separately does research on the two markets. The empirical study shows that momentum effect is different in the two markets. Maybe this is because of the data mining faults. Maybe this difference is really existed. In the last of the paper, I try to explain the results.
Keywords/Search Tags:Momentum effect, Momentum strategy, EMH, Microscopic market frame
PDF Full Text Request
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