The Structural Model Of Short-term Reversals In China And Relative Empirical

This paper mainly discusses a structural model of short-term reversals as well asthe empirical research in China stock market of Shanghai and Shenzhen.We present a structural model of the stock market where a subset of investors isinfrequently present in the market. We study the implications of this assumption onliquidity, return reversal patterns, illiquidity premium, costs of immediacy, returnsfrom providing immediacy and volatility. Our theoretical model predicts andempirically we find that stock’s return reversal pattern is exponential and that theamount of return reversal, the speed of reversal and volatility are related to stocks’liquidity.Based on the theoretical model proposed in this paper, we will apply to all A-sharesin Shanghai and Shenzhen in china between2001and2008. Processing and filteringthe stock samples of the selected area of data. Regression based on this theoreticalmodel and empirical analysis. And empirical from multiple angles.The study results show that: the exponential form of short-term gains of stockmarket reversal predicted by the model, while the same analysis of the combination oflosers and winners combination, winner portfolio in very short-term gains reversednot like the combination of losers showed good exponential. Empirical analysis alsoproved the model prediction on stick liquidity.