The Price Momentum Of Stock In Distribution And Its Empirical Tests

In this paper, a new price momentum of stock in distribution is proposed and applied in real investment. Firstly, assuming that a stock behaves as a multi-particle system, the share-exchange distribution of stock price is introduced and estimated by the normal distribution in empirical tests. Secondly, an iterative method is given to obtain cost distribution of stock price. Thirdly, based on cost distribution, a new price momentum of stock is proposed. An empirical test is given to compare the new momentum with others by contrarian strategy. The result shows the new one outperforms others in many ways. According to cost distribution, the entropy of stock is calculated. Finally, a new portfolio is constructed based on both new price momentum and entropy of stock. And the test shows the one from double indices is better than single index in risk and return.