An Theoretical And Empirical Study On The Stock Price Momentum And Contraria

With the extensive and intensives study in the real financial market,researchers have found more and more anomalies that are hard to be explained by standard finance which is based on the EMH. Recently, behavioral finance which is the combination of finance and psychology has been developed quickly. Behavioral finance can give reasonable explanation to the anomalies in financial market with the application of personal decision research coming from psychology.The overreaction and underreaction phenomena in financial market is important to judge if the market is consistent with the EMH,which is a hot debating. According to EMH, it is impossible for any investor to get risk-adjusted anomalous return for a certain long period. Momentume effect and contrariane effect has been proved significantly in many western stock market, Investors can use the momentum strategy and contarian strategy to get risk-adjusted anomalous that take a greatchallenge to EMH. the predictability stands out to be that security return takes on positively auto-correlated in short term while negatively auto-correlated in long term. Based on long-horizon negative auto-correlation, the contrarian investment strategy that buys previous losers and sells previous winners can be derived.The contrarian strategy is testified to yield significant profits. Based on short-horizon positve auto-correlation, the momentum investment strategy that buys previous winners and sells previous losers can be derived.The momentum strategy is testified to yield significant profits.China 's security market is a newly-established and immature market.Is such strategies also efective in such a market? The Purpose of this dissertation is to address the following research proposals:is the contrarian effect and the momentum effect significant in China.We take different ways to achieve the purpose based on the research cbject,including positive analysis and normtive analysis.The innovation of this dissertation: we choose period in random and settle way,put emphasize on parallel and cross test in up and down period .The sample of the test is bigger than other scholars.our test period isfromJanary of 1997 to December of 2004, Our sample includs most of listedcompanies during the period . The difference between our sample and othersresult in different conlusions.the conclusion is drawn as that the dissertation shows the momentum effectand the Contrarian effect does not take effect in China's stock market but theinvestors could earn abnormal return by making use of momentum strategiesand the Contrarian effect in some situation.