An Empirical Research On Momentum Effect And Reversal Effect Of The Stocks In The Combination Of The Shanghai And Shenzhen 300

Momentum effect is the continuation of the original trend of the stocks’yields, that is to say the higher-yielding stocks in the past period of time will get more yields than the lower-yielding stocks in the past period of time. On the contrary, reversal effect is a phenomenon that the higher-yielding stocks in the past period of time will get few yields than the lower-yielding stocks in the past period of time. Because the momentum effect and reversal effect phenomenon challenged the Efficient Market Hypothesis and can be used to make large-scale arbitrage in the stock markets to get an economic value, it aroused the interest of national scholars. More and more scholars began to study the momentum effect and the reversal effect of various markets in different time intervals, and they tried to explain the two phenomenons by a variety of theories and models.This paper was based on the presumption that stock price valuation system and investor psychology has changed and the changes will impact on the stocks’momentum effect and reversal effect after the start of split share structure reform. This paper used the data of the transaction data of combination of Shanghai and Shenzhen 300 from January 1, 2006 to June 30, 2010 to make an empirical study of the momentum and reversal effect of combination of Shanghai and Shenzhen 300 after split share structure reform.Firstly, this paper reviewed the studies about stocks’momentum and reversal effect at home and broad and compiled the process how they’re found and confirmed. Then, it described the explanation to the two phenomenon given by Schools, that is to say why the momentum and reversal effect exists. Finally, this article studied the momentum and reversal effect of combination of Shanghai and Shenzhen 300 after the start of Split share structure reform.This article showed that after the start of Split share structure reform the momentum effect didn’t exist in combination of Shanghai and Shenzhen 300, but the reversal effect did exist significantly in medium-term. And the reversal effect got stronger as the holding period extended, the reversal effect in bear market was stronger than the reversal effect in bull market. All the stocks’price changed in the same direction. Before the start of Split share structure reform the Chinese stock markets had momentum in medium-term and after that there existed reversal effect, the conclusion which is unlike the previous proved that this article had a new value.