The Analysis Of Intra-industry Stock Price Comovement In China

There always exist common surge and decline in stock market.Intuitively,the phenomenon of stock price linkage is very significant,which has reached consensus among investors and has become a means to judge investment opportunity in practice.Therefore,research of intra-industry stock price comovement in China is important.In this master's thesis,we utilize Approximate Factor Model to study the comovement effects of stock market in China.We use Accumulating Contribution Rate and Communalities Index derived from Approximate Factor Model to evaluate comovement degree in Internal Rate of Return in stock and estimate synchronism of individual stocks and industries.We use the extracted common factors by rotate to classify the intra-industry stocks according to the degree of correlation with the aforementioned rotated common factors.We select the listed companies of eight industries in Shanghai A stock exchange,including the manufacturing industry,the electricity heat and water supply industry,the realty business,the traffic transport industry,the warehousing and mailing industry,the wholesale and retail industry,the finance industry,the construction industry,and the IT industry,using the monthly return rate from March of 2012 to June of 2016 to conduct an empirical analysis.The results show that the internal comovement of various industries is strong in China,it can be seeing that the comovement in financial industry is most significant,followed by information transmission industry,construction industry and traffic transport industry,and the degree of linkage in manufacturing industry,the electricity heat and water supply industry,the realty industry and the wholesale industry is lower than 80%,the realty industry being the lowest Industries with high degree of internal comovement such as the financial industry,the construction industry,the information transmission industry and the traffic transport industry are not sensitive about downturns in stock markets,while under the same situation,those with lower degree of internal linkage are appreciably overreacted.In the analysis of stock synchronism,synchronism distribution in the finance industry is more centralized than other industries,and the realty industry is relatively decentralized.Aiming at industries with either high or low synchronism,this paper proposes effective investment strategies to both bear market and bull market.We classify the stocks in different industries based on their correlation of the rotated common factors and individual stocks,and conduct further study of the intra-industry comovement.According to the analysis above,we draw a conclusion that there are more stocks affected by two factors and less stock categories than other industries in the finance industry.Finally,based on the evaluation measurement of the stocks,we give some investment suggestions by different markets,in order to provide the theoretical basis for rational investors and market supervision department to deal with issues like the financing or the supervision mechanism etc.