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Application Of Momentum And Reversal Effect In A Share Market In China

Posted on:2019-02-10Degree:MasterType:Thesis
Country:ChinaCandidate:T LuFull Text:PDF
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Efficient market hypothesis put forward by classic finance gives an idea that in an effective stock market,all public information associated with the stock has been reflected in the price,and the price at this time is the information effective price.The road to buying and selling stocks through relevant information to obtain excess returns is forbidden.However,a large number of empirical studies by scholars at home and abroad show that certain strategies and investment methods do exist in the stock market.We can use them to obtain stable excess returns.This phenomenon is called financial vision.In particular,the momentum and reversal effects are the auspices of the theoretical and practical circles,and also they are the subject of this article.This article first reviews domestic and foreign literature,and studies on momentum and reversal effects show that testing for different markets,selecting different samples and periods,and even measuring specific indicators,may lead to test results different.However,regardless of the outcome,this article chooses to refer to Western scholars’ research methods to test whether there are momentum and reversal effects in China’s stock market.According to the research conclusions of Jegadeesh and Titman(1993),we should first define a formation period and holding period combination(J,K),and at a certain point,all eligible stocks are ranked according to the yield within the maturity period J.The stock portfolio with a yield in the top 10%is defined as a winning portfolio and the stock portfolio with a yield in the bottom 10%is defined as a loser portfolio.The weights of the individual stocks within the portfolio are equal.Afterwards,the winner portfolio and the loser portfolio are held for time K respectively,and their rate of return within holding period K is calculated and the difference is made to construct the zero-cost combination.Observe the positive and negative values of the zero-cost portfolio returns to determine whether the portfolio may have momentum or reversal effects.Then use the t-test to test whether the zero-cost portfolio returns are statistically significant.Second,in order to study the performance of China’s stock market under different samples and inspection cycles.This article in the empirical test section,has carried on the more detailed classification to our country A stock market.The final study found that:During the period from 2000 to 2012,no matter whether it is a full sample or a separate inspection of the small and medium-sized board and GEM,there is only a significant reversal effect in the stock market;Full circulation reform and margin financing and securities lending were formally implemented at two key timings.It was found that A-shares and small-and medium-sized board markets still had only a significant reversal effect in the six years before and after the full circulation reform and three years before and after the introduction of margin financing and securities lending.A separate inspection of the large-cap stocks in the small and medium-sized board market eventually found that large-cap stocks in the small and medium-sized board market had a significant momentum effect in the six years prior to the full circulation reform.However,in the six years after the full circulation reform,the momentum effect has disappeared,and it has produced a significant reversal effect.In the three years before and after the official implementation of margin financing and short selling,the large-cap stocks in the small and medium-sized board market performed in a consistent manner,that is,there was a significant reversal effect.At the end of the chapter of empirical test,results-related theory has given certain explanations to these phenomena,mainly from the perspective of investors’ behavior and the objective situation of the stock market.However,it needs to be explained that due to the limitation of space,it is impossible to cover all aspects of the paper,so the explanation of the phenomenon here is only for the research results of this paper.Finally,considering that financial anomalies can obtain stable excess returns,and the construction of momentum and reversal strategies involves short-selling mechanisms,so that this article will use the stock market of margin financing and securities lending to design hedge fund products and try to find arbitrage opportunities.Since the performance of the stocks subject to financing and securities lending may be inconsistent with that of the A shares,this article will first examine the stock market of the securities lending and securities lending subject in the chapter of specific application.The test results show that there is a significant reversal effect in the mid-cap stock market that participates in margin financing,and the formation period and holding period of the corresponding portfolio are(1,1).Next,in order to test whether the strategy corresponding to this combination is successful,this paper has further verified it during the four years from 2013 to 2016.That is,using a reversal strategy to buy a combination of losers and short-selling winners,and see if zero-cost combinations can achieve positive returns.During the four-year verification period,some costs were initially considered,including interest on margin financing and securities,commissions and stamp duty.In addition,the drawing of the yield curve,the calculation of the fund’s performance indicators,and the approximate distribution of the yields were also conducted and compared with the CSI 300 index.The results show that this combination is superior to the CSI 300 index,so this combination is used to design hedge fund products.Finally,this paper adopts the strategy of(1,1)combination.After fully considering various types of costs and different stock price combinations,the year 2017 is selected to perform simulation operations on hedge funds.We still introduce the CSI 300 index for comparison with hedge fund products.The results show that when we use different stock price combinations to operate,there is a big gap in the yields.The combination of buying at the highest price and selling at the lowest price can yield an excess return and at last we analyze the causes of the results in detail.
Keywords/Search Tags:Momentum effect, Reversal effect, full circulation reform, Margin trading, Hedge Fund
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