Improved Momentum Strategy Based On Investor Sentiment

Momentum strategies are well known by their strong positive average returns in America.However,in Chinese equity market,momentum is a reversal factor.The return of big momentum portfolio is lower than the small momentum portfolio.And all the portfolios have a positive alpha,which makes it hard to construct a hedging portfolio with high excess earning.The one-side strategies are highly related to the market.So,it is important to select suitable time to buy stocks and sell stocks.This paper introduces a strategy that helps investors to forecast the market sentiment by constructing the sentiment factor.And the strategy doubles the total return.This paper is divided into six chapters.The first chapter induces the significance of the paper.The second chapter summarizes the researches on momentum and sentiment;The third chapter introduces the definition of momentum and sentiment factor.And we also classify the sentiment factor on market;In the fourth chapter,we introduce the method of data processing and the construction of momentum strategy;The fifth chapter presents the synthesis of sentiment factor and the improvement of our strategy by adding sentiment into the strategy.The last chapter is the conclusion part.