Research Of Industry Portfolio In China’s A-share Market

The traditional efficient market hypothesis theory thinks that stock return followsa random walk, is unpredictable, namely, no matter what kind of informationinvestors have since stock prices obey a random walk, no matter using what kind oftechnical trading strategies, investors are unable to get excess profits. But since the1980’s, a large number of ofreign studies have shown that if the recent share price asprediction variables, stock prices in the short term (12months) presents as "inertia"effect; In the long term (3to5) years，earnings is reverse the trend. Namely, thereexists some predictable pattern in stock prices, now the price and the price of the past,present and past earnings between is not completely independent, there is a certainkind of corerlation among them.This paper, based on the2007to2013data of S.W. industry based secondaryclassification index, use the traditional total revenue and the latest build compositeresidual error revenue method，research from the perspective of industry in ShanghaiA-share market in China momentum or reversal strategies under different marketcondition observation point. The results show that the short-term momentum andreverse investment strategy can both get significant benefits, and residual errorrevenue portfolio’s income is much more remarkable than the total revenue portfolioin excess returns. And by comparing the Sharpe Ratio, Fa ma-French three factor’srisk exposure and industry efctor, we ofund that the steady state of observation pointscan gain greater excess return, and the larger the company size, the better, the greaterthe momentum over the reversal. At last, by using fundamental analysis、technicalanalysis and the theory of noise trading and overreactbn theory from the perspectiveof behavioral ifnance, we simply analyze the strategy.