Empirical Research On Momentum Phenomenon And Contrarian Phenomenon Of Stock Open-end Fund

The 38 stock open-end funds which were established before the end of 2003 are researched during the period from January 2004 to July 2009 to study the existence and significance of the momentum phenomenon and contrarian phenomenon in Shanghai and Shenzhen stock open-end fund market. Behavior financial theory is employed to explain the empirical results and invest profits between the momentum and contrarian trading strategies are compared in order to provide helpful reference for the fund investors, managers and government, which has significant importance in both academe and practical filed.The grouping method and two-way table method are usually used to research the momentum and contrarian phenomenon. Both of the methods are improved according to the sample and time segment of the empirical research in the paper. Compared to the non-fixed grouping way in the traditional methods of the grouping and two-way table, fixed grouping one is put forward in which the fund members of winners and losers are fixed in different holding periods of one certain forming period and ranked by their excess return rates in the corresponding forming period. The following are the conclusions from the empirical research in both non-fixed and fixed way of grouping method and two-way table method.Firstly, in the traditional methods of both grouping and two-table, the momentum phenomenon is no less than 95% and the significance is over 80%, which shows the momentum phenomenon is very significant in shorter period in stock open-end fund market.Secondly, in the fixed grouping methods, the contrarian phenomenon is about 50% and the significance is over 20%, which shows the contrarian phenomenon increases and is as many as momentum phenomenon in longer period in stock open-end fund market.Thirdly, in the fixed grouping methods, the momentum phenomenon is no more the dominant and even less than the contrarian phenomenon, however the significance of momentum phenomenon is always more than that of contrarian phenomenon. The momentum phenomenon is significant in shorter period and the contrarian phenomenon increases in longer period in Chinese stock open-end fund market. In the view of behavior financial theory, it is the cognitive bias and overconfidence that lead to the overreaction and under-reaction. Suggestions and corresponding measures are put forward according to the actual situation such as bad market information, investors with little experience and weak supervision of government and so on in Shanghai and Shenzhen stock open-end fund market.