| A lot of researches of stock market had been done under the classic framework(The EMH,CAPM) of modern finance and they had made many achievements.However, there are still some unexplainable market anomalies.This paper is the study of momentum effect and reversal effect.DeBondt and Thaler(1985) were the first partners who studied the reversal effect.The research was about the returns of American stock market and the forming period and holding period were3years to5years.The research showed the poor performing stocks in the past3years to5years would perform better in the next3years to5years.They found that the reversal effect did exist. Jegadeesh, Lehmann (1990) found that the reversal effect of short term was significant in stock market of US A. Jegadeesh, Titman (1993) also studied the returns of American stock market (the forming period and holding period were different from DeBondt and Thaler(1985) their forming period and holding period were3months to12months).In the end, they found the period of3months to12months combination had significant momentum effect.Generally speaking, most of the empirical results showed that in the medium/long term, there were momentum effect and reversal effect in the foreign stock markets. As for the causes of momentum effect and reversal effect, people tried to explain the phenomenons in two directions:rational framework and irrational framework.Under the rational framework, Fama-French (1992) tried to explain momentum effect and reversal effects through three factor model,they thought the momentum effect and reversal effect were not the evidence of inefficient markets.what’s more, the momentum effect and reversal effect only occasionally existed in efficient market. Moskwitz Grinblatt (1999) studied the momentum effect in four factor model, they thought the momentum effect was caused by industry factor.Under the irrational framework, Daniel, Subrahmanyam Hirshleifer (1998) constructed the DHS model.The model found that the momentum effect was caused by "over reaction" and the reversal effect was caused by "underreaction". Hong, Stein (1999) were on the opposite side, they thought the momentum effect was caused by "underreaction" and the reversal effect was caused by "over reaction". The BSV model of Barberis, Shleifer Vishny (1998) was consistent with HS model.The domestic researches of momentum effect were mainly concentrated on main board market. The results of domestic researches on momentum effect and reversal effects:momentum effect is not obvious in medium/long term but it became obvious in short term. On the contrary, medium/long-term reversal effect was significant. In general, China’s main board market’s reversal effect was obvious. As for the causes of momentum effect and reversal effect, the researches were also conducted in two directions:rational framework and irrational framework.Based on the information above, I will talk about the purpose and significance of this thesis.First, there are no empirical analysis of momentum effect and reversal effects on GEM (Growth Enterprises Market) board. Second, the domestic researches are mainly on medium term and long term. So, this paper wants to explore the existence of momentum effect and reversal effect in the short term. Third,the hypothesis is thatour stock market has the mechanism of short selling.so how to use the momentum strategy and reversal strategy to make maximal profit? Fourth, try to explore the causes of momentum effect and reversal effect.The Methods of this thesis:This paper selects the samples listed on the GEM market whose IPO’date were before November,2010.The interval is between January,2011and February2014, the sample has a total of153weeks and134stocks.This thesis use the method that is similar to JegadeeshTitman (1993).The forming period is1week to8weeks and the holding period is the same.I struct a portfolio which is definited as WP-LP. If WP-LP is significantly positive, we can prove the existence of momentum effect, if WP-LP is significantly negative, then we can prove the reversal effect.The empirical results:momentum effect does not exist in GEM of short term (2to8weeks), only in a period of extremely short time(1weeks) with K>1, it shows significant momentum effect. When J>1the short-term reversal effect is very obvious, the portfolio (8,2) gets an average return about1.5%per week. The effectiveness of momentum strategies and reversal strategies shows that the reversal strategies are effective but the momentum strategies are on the opposite.Under the rational framework, the empirical results proved that CAPM model can not explain the existence of momentum effect and reversal effect in GEM. Under the irrational framework, we can use the methods of behavioral finance such as HS model, DHS model BSV model to explain the causes of momentum effect and reversal effect in GEM. But the behavioral finance is just from logic qualitative analysis which is lack of the support of data analysis. so this is the aspect that I want to improve. |
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