| Evaluating momentum effect is not only a necessary way to test the "Market Efficient Hypothesis" in micro-finance, but also a valid stock-picking strategy. Researches have shown that even applying the same variable and methodology, different markets have appeared different results, while for the same market, applying different test methods, their results are also different. Depending on the past researches on the development of Chinese Stock Market, we believe Chinese Stock Market, being a part of merged markets, should not have a momentum effect or have a momentum effect varying with the volume, which is the basic idea for the test model.With a weekly return sample of equities listed on Shanghai and Shenzhen Stock Market during January2000to December2011, this study investigated on the momentum effect in China, employing a method of overlap sampling. The result has shown that there is no momentum effect in Chinese Equity Market, considering the insignificant momentum return as well as T-statistics among different periods. Take the share reform as a watershed. Before the reform there is a momentum effect only within3weeks, while after the reform there is no significant momentum effect. Furthermore, after taking volume factor into consideration, the result of no momentum effect in China has been proved to be more significant. Further analyses show that after adding the volume factor, all of the36portfolios are significant smaller than those without volume factor.It’s sagacious to assert that researches on the momentum effect in Chinese Stock Market is not yet mature, because of the short sample period and sample size. On the other side, depending on the past price and volume to select portfolio stocks will make investors suffer a strict high possibility of loss. Moreover, when extending the formation period and holding period, the loss could be much larger, which explains why there are mainly short-term transaction in the market during the past20years. |
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