An Empirical Analysis On Momentum Effect And Reversal Effect Of China Stock Market

In this paper,we use the data of China A-stock market to test whether there is a momentum effect and reversal effect in China A-stock market,and explore some of the phenomena of the Chinese stock market and the reasons for the formation of the momentum effect or the reversal effect of A-stock market.According to the efficient market theory,the stock price has fully reflected all information,investors cannot be in the market risk arbitrage opportunities.However,a large number of studies have shown that: the stock market in developed countries,there is a momentum effect and reversal effect on the effective market theory has had a significant impact.The main purpose of this paper is whether China A-stock market has the momentum effect and reversal effect.This study has important theoretical and practical significance for the effective market theory.In order to verify the momentum effect and reversal effect of A stock market,this paper summarizes the research results of some scholars at China and abroad,and studies the momentum effect and reversal effect of A stock market by momentum strategy.The so-called strategy yields specifically refers to buying past the best market performance strong stock shares to construct the winner portfolio,while selling the past market performance poor weak stock structure of loser portfolio,thus forming a zero cost portfolio,calculate the revenue,if there is a positive earnings momentum effect,if return is negative there is reversal effect.Through the research of this paper,the following results are obtained:1.through the empirical analysis of the momentum effect and reversal effect,we find that there is no momentum effect in China's A share market.In the short term,there is a significant Contrarian Effect in bull market,and the bear market has no momentum effect and reversal effect.In the long term,China A-stock market as a whole has reversal effect2.China A-stock market investment income depends on the market trend.From June 2005 to June 2015,almost all of the winner portfolio and loser portfolio gains were significantly positive,which is in line with the overall rise in the market.In the short run,most of the winners and losers in the bull market gains are significantly positive,while in the bear market,all of the portfolio income is significantly negative.In the trend of market volatility,the combination of winners and losers portfolio has a positive negative.3.single factor model can not explain the reversal effect.The A stock market reversal effect were tested using single factor model,found that ?winner portfolio is significantly greater than that of the loser portfolio,the risk coefficient of winner portfolio is significantly higher than the loser portfolio,get the market higher compensation theory,the winner portfolio should have higher profits,however,test results show that the loser portfolio is higher than the winner portfolio rate of return.The single factor model cannot explain the reversal effect,which further shows that the existence of reversal effect means that the stock market is not completely effective.