The Study Of Contrarian Effect Of Small And Mid Enterprise Board

In1960s Fama puts forward the effecient market theory.After that the academic circles has debated for the existence of the efficient market. Efficient market theory says that: in the market, there are a large number of rational and wants to maximize the interests of the investors, they have the same information, and they recommend the information in the same way, the current stock prices totally reflect all information they could get in the market. This theory is particularly prevalent in the1970s, once academic circles regard it as the bible.But after entering1980s, some scholars found that some stock price movement is difficult to be explained by the efficient market theory. In1985Debont and Thaler found the phenomenon called "contrarian effect".The contrarian effect indicates that stock price tendency will end.Stocks that have performed better in the past can earn lower profits than stocks that performed worse in the past.In1993Jegadeesh and Titman found the phenomenon called "momentum effect".Momentum effect indicates that stock price tendency will last for a period of time. Stocks that have performed well in the past can earn higher profits than stocks that performed poorly in the past.I’m very interested in exploring the stock price movement rule of China small and mid enterprise board.So this article choose it as the research object.As China small and mid enterprise board has been founded for one decade,there are nearly seven hundred stocks. The data for our research is enough. This paper can be divided into six parts:Chapter1is to introduces the research background, research significance, the basic ideas and logical structure, and sort out related literature.Chapter2is the literature review,we collect most research achivements in the field of contrarian effect and momentum effect from home and abroad.Chapter3is to study the existence of contrarian effect in China small and mid enterprise board.Firstly,We divided the whole period into two parts:bull market,bear market.And then we devided the stock into two groups:high turn-over rates group and low turn-over rates group.We do the research in the five different parts.Chapter4is to decomposed the expected profits by using one-factor pricing model.But we found that the result we got in Chapter4and it in Chapter3contradict.There are two possible reasons for it.Chapter5is to find the causes of the contradict. We study the existence of contrarian effect by using WRSS and decompose the expected profit by using C-K identity model.Chapter6is to summarize the conclusions of the paper and give some advisements to the investor and the regulator.The main conclusions of this paper are as follows:Firstly,contrarian effect does exist in China small and mid enterprise board.Secondly, in bull market only a few strategies can be observed obvious contrarian effect;in bear market a lot of strategies can be observed obvious contrarian effect.Third, in the high turn-over group have found statistically significant contrarian effect;in the low turn-over group there are both statistically significant contrarian effect and momentum effect.Fourthly, China small and mid enterprise board market is not an efficient market and the predictability of the time series in SME board is very great.