Research On Momentum Effect And Reversal Effect In China Growth Enterprise Market

The effectiveness of the stock market has been the focus of the scholars’debate.The efficient market hypothesis account that prices in the securities market havetimely and fully reflected involved all the information of relevant listed companies.Thus investors cannot gain excess return by using past information to analysistechnologically. But starting in the1980s, more and more empirical studies show thatthere is a "vision" in the securities market, which is typically the momentum effectand reversal effect. The momentum effect refers that the stock yield is thecontinuation of the trend of the original movement direction; the reversal effect refersthat the stock yield which is low the past for a period of time will be a big trendreversal in the future a period of time. The discovery of the momentum effect and thereversal effect is a severe challenge to the effectiveness of the market. Of course, themomentum investment strategy and reverse investment strategy were produced whenthe stock price momentum and reversal effect was found. By using the two strategies,more significant returns can be obtained.Recently, more and more domestic scholars pay close attention to themomentum effect and the reversal effect, but the domestic scholar’s research object ismain board and small and medium-sized plate. In this article, firstly the domestic andforeign research results about the momentum effect and the reversal effect areintroduced, and the efficient market hypothesis is reviewed. Then the momentumeffect and reversal effect are analyzed from the perspective of behavioral finance.Secondly, according to the characteristics of the Chinese stock market and ourcountry’s basic national conditions, the formation mechanism of the momentumeffect and the reversal effect are analyzed. Finally, using the month of transactiondata of the growth enterprise market from December1,2011to November30,2014,the existence of the momentum effect and the reversal effect in the growth enterprisemarket is studied. Research shows that there are short-term reversal effect, middle-term momentum effect and long-term momentum effect in the growthenterprise market in China.