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Research On The Reform Of Non - Tradable Shares And The Inertia And Reversal Effect Of Chinese Stock Market

Posted on:2014-05-21Degree:MasterType:Thesis
Country:ChinaCandidate:T MiaoFull Text:PDF
GTID:2279330434972047Subject:Business management
Abstract/Summary:PDF Full Text Request
Since discovered, momentum effects and reverse effects are hot issues in research of financial market. Based on trading data of Chinese A stocks between1997and2012, this paper conduct empirical research of momentum and reverse effects in China and proposed own hypothesis for Chinese market. There contains two parts in the paper:First, using weekly return and including six different sorting periods and six testing periods, we did empirical test for the whole period of1997-2012. We find the stocks reveal reverse effect, and the return is significant while sorting and testing periods are both one week. Descriptive statistic also shows that the first weeks’ abnormal return is significant positive for reverse strategy and the second weeks’abnormal return is negative, the return of other weeks declines as the testing period increase. CAPM model and three-factor model cannot explain such phenomenon. Considering the effect of first week, we introduce lagging week, when we sort the stock, we do not long or short it immediately, and instead we keep it for a week. We find stocks reveal momentum effect after we introduce lagging period. We believe in Chinese stock market, most investor use technical analysis and trade in a short term. When we use week as our testing period, the existence of overreact causes reverse effect. Since overreaction and trading pattern do not last very long, in the next several weeks, the reverse effect becomes less and less significant. The momentum effect we found in lagging period test can also be recognized as "the reversion of reverse effect".Second, we grouped the whole data as pre-reform and post-reform, and do the same test for these two groups. We compared results of tests and find that after the non-tradable reform the reverse effect becomes more significant. Further, we grouped stocks as high-unlock stocks and low-unlock stocks and compared these two groups. Research shows the returns of short strategy in high-unlock stocks is much high than low-unlock stocks. This shows the unlocking of non-tradable stockholders is also short term. When the return is higher in previous week, the stockholders will sell their stocks in the market, thus making the short strategy higher.In this paper, we pointed the short-term sight of investors, listed companies and government makes the whole market short-sighted, which contributes to the specific reverse effect in Chinese market.
Keywords/Search Tags:Momentum effect, reverse effect, non-tradable reform, unlock
PDF Full Text Request
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