| The hypothesis of rational man, which is supposed to be the bedrock for main-trend economics, serves as an important hypothesis for the study of economics in current trend. Based on such hypothesis, several masters for economics, such as Eugene F. Fama, Stephen A. Ross, propose Asset Portfolio Theory, CAPM(Capital and Asset Pricing Model), Efficient Market Theory (Eugene Fama), BS option Pricing Model, Arbitrage Pricing Model(Stephen A. Ross), which are pillars for modern finance. Efficient Market Theory and Capital and Asset Pricing Theory are currently the very fundamental tools for and play an undoubtedly significant role in the study of stock market. However, there is suspicion on the reliability of them.The Theory of Efficient Market insists that stock price is inclusive of all market information, indicating that investors will get no extra proceeds no matter what investment strategies they adopt. But momentum effect is found to challenge the Theory of Efficient Market when it is applied in US stock markets. Investors can make additional profits provided that they buy in the stocks with formerly good performance while sell out those with bad one, with reference to stock prices.Is there any momentum effect in Chinese stock market? Not consensus has been reached among scholars yet. Some say there isn’t, while some hold that there is some subtle effect. Anyway, it can be undeniable that investors blindly gamble and those who have won will constantly win in Chinese market.The former researches about the momentum effect in stock market can be categorized twofold:One concerns the entirety of the whole A Share, SMEs board or Start-up Board and focuses on the study of each stock. Even though through this method can the study of the momentum effect in the overall Chinese market be possible, the characteristics of each industry fail to be considered. The other touches upon, with the perspective of industries, the study of first-class industries on Chinese stock market. Its advantage lies in that the second method helps to draw a distinction among industries regarding their performance on the momentum effect. However, if each industry is selected as a unit sample and its index is regarded as a reflection of the entire industry, the samples may be inadequate in number.This thesis tries to overcome the deficiencies of the aforementioned two study methods, by selecting110typical stocks among a variety of industries. The samples are selected within the period from2006to2012,356weeks, during which Chinese stock market were experiencing a through shift from bull market to bear market. The empirical study conducted respectively on the two periods is good for determining whether momentum effect really exists, and whether there is difference among momentum effects in different market environment if it does. The source of data comes from CSMAR.The empirical test falls into three parts, and conclusions are drawn respectively from them:1. Within all of the selected samples, momentum effect and reversal effect find their apparent mark in cyclical industries in Chinese stock market. Momentum effect is more obvious than reversal effect, with the characteristic of "those who have won will constantly win".2. In the phase of bull market, momentum effect is strong in cyclical industries, while both momentum effect and reversal effect are weak in the phase of bear market. This indicates that investors show intense interest in the popularly invested stocks in bull market. However, they become more prudent in bear market and this leads to a much weaker momentum effect than that in bull market. All in all, there will be initially positive correlation between the significance of momentum effect and its forming and holding periods. As formation period prolongs, momentum effect gains more strength and starts to dwindle at some point, which marks the beginning of reversal effect.The conclusions above may be attributed to some characteristics of Chinese stock market, which include the characteristics of emerging market, policy, investors, asymmetric information and so forth. When referring to policy characteristics, the foundation of Chinese stock market is for the governmental solution to the funding issues of state-owned enterprises, and is imbued with a strong sense of government. The direct governmental intervention on stock market will pose significant influence on the volatility of stock market, and policy information is always influential on several key factors of stock market. With regard to investor characteristics, institutional investors tend to be professional in investment management, to be aware of information sources, and to be regular in investing behaviors. These help to rationalize the investors’investing decisions. While most individual investors are by-workers or amateurs in stock investing and thus do not have enough time or energy to collect and analyze information. Rather, they focus more on the superficial changes on stock price instead of the real driving forces of the changes, which makes their investment irrational. Too much attention on policy information, difference between institutional investors and individual ones in terms of investing behavior, as well as some other factors codetermine the momentum effect and reversal effect in Chinese stock market. |
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