The Profitability Analysis Of Value And Momentum Strategy In Multi-horizon

Since the late1980s, many of the empirical results and investment practices haveproved that EMH doesn’t fit for the financial market, typical anomalies are valuepremium and momentum effect. Active stock investment strategies, such as value andmomentum strategy which could help investor get a significant excess return in stockmarket, is becoming a consistent view of today’s world financial investment field. As anew research area, the strategy which mixes value strategy with momentum strategy hasbeen the hot topic on financial investment in recent years. And the core problem of theseresearches is that how to amalgamate value strategy with momentum strategy properly sothat the stock portfolio will be more efficient.This paper mainly discusses the profitability of value strategy and momentumstrategy in China’s A shares market in multi-horizon and evaluates whether theconstructed mixed strategy is efficient. At first, this paper does empirical research of300shares in the stock markets of Shanghai and Shenzhen from2005to2013. Following theclassical J/K combination investment horizon, this paper studies the profitability ofsingle value strategy and single momentum strategy, along with choosing the mosteffective value indicators and momentum indicators in multi-horizon. Secondly, weconstruct specific mixed strategy and choose stock portfolio with potential extra profit byusing effective value indicators and momentum indicators which are filtered by DEAmethod. And then, we evaluate the efficiency of this portfolio with information ratio.Finally, this paper puts forward some advices for the stock investors of China’s A sharemarket with the empirical results, and then proposes prospect of the future relativeresearch.This study aims to amalgamate value strategy with momentum strategy by makinguse of DEA method. And construct a more effective strategy on stock portfolio selectionthan single value strategy and single momentum strategy. The conclusion can provideeffective support for both theory and practice in investment decisions and riskmanagement of capital market.