Absolute Momentum Applys In Stock Market And Tests The Effect

The efficient market hypothesis and capital asset pricing theory are dominant in traditional finance theory. Later appeared Financial visions such as momentum effect,the January effect and so on formed a huge impact on traditional finance theory.Behavioral financial theory from the perspective of irrational or bounded rationality study and analysis these Financial visions to find the reason behind. For Financial visions n research,is what makes high maneuverability of some investment strtatagies can be applied to capital market. In recent years some institutional investors take momentum strategy to invest in the capital markets for excess returns,these caused the wide attention of scholars both at home and abroad. This paper mainly focuses on absolute momentum,testing it's effect in Chinese stock market.In many empirical studies on the momentum effect analysis, most scholars use following Jegadeesh and Titman(1933) study strategy, performance well in the stock market in the top 10% will be constitute a winner part and performance bad in the stock market in the end of 10% will be constitute a loser part. But the momentum effect according to the forms can be divided into absolute momentum and relative momentum, most papers still confined to the study relative momentum. Therefore, this article choose absolute momentum as a point to applied to the stock market of our country, and use the performance of the CSI 300 index to represent the basic condition of the stock market in China.This article selects the CSI 300 during the year of 2008 to 2015 as basic data samples to do test analysis, and we will respectively considering review period of 1 to 9months, it is concluded that in each review period under the investigation of absolutegains momentum. Synthetically considering income index to select the optimal review period and take the optimal review period to testing the effect of absolute gains momentum, comparing the income index,risk index, sharp index and maximum retracement between the simply hold the CSI 300 strategy. Finally it is concluded that the effect of absolute momentum strategies is that income is higher than, risk is lower than simple hold the CSI 300 strategy.