An Empirical Study On Short-term Momentum Effect In China’s Growth Enterprise Market

Since Eugene Fama proposed the Efficient Market Hypothesis in 1970,this classical theory has been applied to relevant academic researches and actual investment.Since 1980 s,some financial anomalies has been found in the newly developing capital market,which violates the Efficient Market Hypothesis including momentum effect,reversal effect,calendar effect and so on.These phenomena have posed a serious threat to the Efficient Market Hypothesis.Compared with the western mature capital markets in developed countries,the history of our stock market is still short.It is not an efficient market with many problems needed to be solved.Only by fully knowing and researching the existing risks and defects in the Growth Enterprise Market can we put forward corresponding measures to solve these problems and improve our Growth Enterprise Market.Firstly,this paper reviews and summarizes domestic and overseas literature about the existence test of momentum effect.Then this paper introduces some relative theories about Efficient Market Hypothesis and Behavior finance including the difference and divergence and trying to explain momentum effect in both aspects.In the terms of empirical study,this paper is mainly based on the method proposed by Jegadeesh and Titman in 1993.Then this paper selects the transaction data of Growth Enterprise Market stock price from 46 th week in 2009 to 27 th week in 2014 and choose week as study period,construct portfolios based on the ratios of weekly return.Lastly,this paper comes to the conclusion of the existence of momentum effect or reversal effect by inspecting the significance of portfolios return ratio.Combined with the present situation of Growth Enterprise Market,this paper tries to explain why momentum effect or reversal effect exists in China’s Growth Enterprise Market.The empirical result of this paper shows that the portfolios will get significant negative yield rate in the short term.In other words, the short-term reversal effect has existed significantly in China’s Growth Enterprise Market.Meanwhile,in the mid term,the reversal effect may exist considering the lack of necessary data.So whether reversal effect in the mid term exists or not should be observed and researched furtherly.The empirical result not only fill the cacancy in the field of momentum effect researches in China’s Growth Enterprise Market but also can provide reference for governors and investors.