Analysis On Rotation Of Large-Cap Stock And Small-Cap Stock Of A Stock Market In China

In China’s A-share Market, large cap stocks and small cap stocks rarely rise or full at the same time, and investors usually find than stock index goes high while they earn little money, which means they choose a wrong invest style。As “Two eight phenomena” and “eight two phenomena” often appear, the shift of large cap stocks style and small cap stocks style become the normal state in A-share Markets。It is important for investors to catch up with the change of the market, observe the shift of large cap stocks and small cap stocks style and allocate their assets, which is their savings or salaries.Existing studies about the shift of large cap stocks style and small cap stocks style were focused on the industry, but not the shift. This paper pays attention to the factors which influent the shift, chooses related variables to do quantitative analysis, builds SVAR model, in order to figure out how the factors influent the shift of large cap stocks style and small cap stocks style, which is also the innovation of the paper.Here goes the main concept of the paper:Firstly, combined with the modern finance and the behavioral finance, the paper goes deep into the theory analysis of the shift of large cap stocks style and small cap stocks style, which is prepared for the quantitative analysis in the following sessions.Secondly, the paper focuses on the authenticity that whether the phenomenon exists in A-share Markets。And the paper introduces a variable(RSI), which is able to identify the large cap stocks style and small cap stocks style, to analysis historical data and prove the existence of the phenomenon.Thirdly, the paper looks for the key factors that affect the shift of large cap stocks style and small cap stocks style, which are macro-economic, micro market and investor psychology. The paper uses stationary analysis and Grainger causality analysis to measure how the factors impact on the shift of large cap stocks style and small cap stocks. Then, the paper do regression analysis on the three factors and SI(the excess profit of large cap stocks style and small cap stocks style), and build a VAR model, and then improve into proper SVAR model. Based on SVAR model, the paper use impulse response function to quantize the impact and the influence path of each factor, optimize the model, and find out the profound economic significance.At last, based on the research conclusion and empirical analysis, the paper make some suggestion for investors:1)The shift of large cap stocks style and small cap stocks style do exist in A-share Markets. Between 2006 and 2015, there is ten obvious cycles in A-share Markets.2)In macro-economic perspective, the degree of macroeconomic boom, CPI growth rate and base money supply are the main factors; While in micro market, the stock market turnover rate makes a difference. And investor psychology has an enhancement and reversal effect on the shift.