Research On Momentum Effect Of Chinese Stock

In 1970 Eugene Fama deepened and proposed Efficient Marketing Hypothesis. The theory is the cornerstone of modern classical theory, it opens new door to a complex pricing model, Fama considered that excess returns was just compensation for corresponding risks in an effective market, and investors can not achieve sustained excess returns. So investors should adopt a passive investment strategy.However, financial anomalies found by experts has brought great challenge to efficient market theory, active investment strategies designed for anomalies have emerged, and contrarian strategy and momentum strategy are two of them. With continued weakness in the Chinese economy, choosing industries of good performance or emerging industries has become one of the major our investment strategy of institutional investors. Therefore, industry momentum research has important practical significance.This article reuse Moskowitz and Grinblatt (1999) research methods to build industry momentum strategies, and compared between strategy earnings and market yield rate, we found that the industry momentum effect exists in the short and long term in China, but in the mid-industry reversal effects are significant. Specifically, buying the winner industries contributed most of the excess return, and selling losers industry cannot get a positive excess return, or even negative returns. From the time dimension, because the phenomenon that Chinese stock market is a "policy market" is more obvious before 2000, so the excess earnings of momentum strategies is not significant, but with the 2008 financial crisis, the continued weakness in the overall stock market makes the prominent excess returns of industry momentum strategies. Momentum effect of motherboard is weaker than that of all stock markets, and gradually disappeared after 2010. So I suggested that the contribution of small board and GEM to momentum effect on the industry is growing after 2010.In addition, Spread Fama-French three-factor model were analyzed to investigate the relationship between common factors and industry momentum effect. By constructing the regression model, we have found that common factors forms a significant impact on the industry momentum gain. Size factor play a most role on the excess return of specific industry, followed by BE\ME factor, market excess return influence least on the industy.