A Research On The Performance Of Reversal Effect Of A Shares In Shanghai Stock Market

The effectiveness of financial markets have always been the focus of finance study. Since the 1980s, many empirical results show that in reality of securities market, there exist many visions which conflict with the efficient market hypothesis ,the reversal effect of price is one kind of vision. The existence of reversal effect is related to the problem of the effectiveness of financial markets, so it is attracting more and more scholars' attention.This paper reviews the scholars' research results about reversal effect at home and abroad, and then from behavioral finance' perspective, based on investors' psychological research and the three model of behavioral finance, the formation mechanism of reversal effect were introduced. Then, this paper made empirical research about Shanghai a-share' reversal effect by constructing the arbitrage portfolio. The study found that compared with a bull market,no obvious bull and bear market,stocks under the condition of a bear market has a significantly higher reversal effect. Compared with expensive stocks,low turnover rate stocks,big-scale stocks, stocks and with characteristics of low-cost,high turnover rate and small-scale has a significantly higher reversal effect. In the Shanghai a-share market, constructing arbitrage portfolio by sell the winner portfolio and buy the loser portfolio can obtain positive yields in a larger proportion.