Empirical Research On Contrarian Strategy And Momentum Strategy For Investing Stocks

From the1980s, Efficient Market Hypothesis has been the challenge of a numberof empirical research, These empirical research have shown that a significant marketanormalies phenomena in the market. One of the most typical is the contrarian andmomentum of the stock price. These two phenomena is the most puzzling one of theanormalies phenomena in the market. These two phenomena in the concretemanifestation of the stock market is very worthy of attention and research.Is there such phenomena in the stock market? And are the investment strategiesfeasible? This paper first analyzes the contradiction between the efficient markethypothesis and the reality investment strategy. Then this article comprehensively andsystematically explains the traditional finance and behavioral finance. Finally adoptedthe U.S. S&P500from December1997-200812months of weekly trading data., wedo some research on the existence of the contrarian and momentum of the stock priceand the reasons for the existence. We have found three conclusions. First, The U.S.stock market performance for short-term contrarian, medium momentum, long-termcontrarian. Second, the abnormal returns of two strategies can not explained by thesystematic risk alone. Third, the Fama-French three-factor model succeeds to explainthe contrarian profits, but fails to explain the momentum profits.Besides, This article is also based on the analysis of empirical findings, fromanalyzing the particularity of China’s stock market., get some enlightenment on theChinese stock market, and explore china’s stock market investment strategyrecommendations according to China’s actual.