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Heterogeneous Beliefs And Chinese Stock Market Reversal Effect

Posted on:2013-07-15Degree:MasterType:Thesis
Country:ChinaCandidate:J W ZhuoFull Text:PDF
GTID:2269330422463836Subject:Finance
Abstract/Summary:PDF Full Text Request
The effectiveness of the financial markets has been the concern of academia, thestock market appeared momentum effect and reversal effect attracted many people’sattention, the use of behavioral finance theory to explain the stock market vision hasbecome a hot issue. After twenty years’ development, the stock market of China is farfrom effective, we can expect momentum and reversal effect that exists in the maturestock market do also exist in the Chinese stock market.At the same time, because Chinesestock market’s heterogeneous belief is high, the relationship between heterogeneous beliefand reversal effect is a notable problem.This paper analysis the Chinese stock market momentum and reversal effect bytheoretical and empirical methods. This paper use Hong and Stein’s theory, divide theinvestor into observation information traders and momentum traders, and then introducethe agent index of heterogeneous belief, to conclude that China’s stock market is prone toappear reversal effect and the higher of heterogeneous beliefs is more prone to appearreversal effect. The empirical aspects, first of all, this paper adopted Jegadeesh testmethods, found that all zero investment strategy in China’s stock market appear reversaleffect. Secondly, in view of China’s stock market exists serious heterogeneous belieffeatures, this paper selects the turnover rate as heterogeneous belief agent indexes, and testhow different turnover rate of investment strategy affect reversal effect, and the resultsshow that the high turnover rate of stock’s reversal effect is obvious. After controlling thescale factor, the conclusion is consistent. Finally, this paper tests whether the reversaldifference between the high and low turnover can be explained using CAMP andthree-factor model. The results show that CAPM and Fama-French model can’t explainthe difference between the high and low turnover.In general, this paper try to apply the heterogeneous belief to explain China’s stockmarket reversal effect, and then conclude that the higher heterogeneous of beliefs shouldlead stronger reversal effect.
Keywords/Search Tags:momentum effect, reversal effect, heterogeneous belief, turnover rate
PDF Full Text Request
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