The Market Timing Strategy Research Based On The Stock Price Momentum Life Cycle

Investment management plays an important role in improving the performance of investors.In short,investment management mainly refers to " stock picking " and "time to choose".Among them,market timing is the top priority of investment management.Research shows that its contribution to investment income accounts for about 90%.Therefore,the study of market timing strategy is of great significance for investment management.However,in the theoretical research and practical application of market timing strategy,momentum and reversal strategies remain the most important research and application strategies.In a ineffective market where stock prices generally exist momentum and reversal effects,investors generally use momentum strategies or reversal strategies to make market timing choices.However,it is regrettable that investors use momentum and reverse strategy to trade,although sometimes can get a certain amount of excess returns,but in the long term,it does not achieve the desired returns,sometimes even serious losses.The reason is that it is closely related to the momentum life cycle of the stock price fluctuation,that is,the momentum effect and reversal effect of the stock price will change with the time.Based on this,this paper focuses on the market timing strategy based on the momentum life cycle,and aims to build market timing strategy through the research on the momentum life cycle of the stock price,in order to provide the investors with the effective market opportunity to provide decision-making reference and improve their investment performance.In order to study the market timing strategy based on the stock momentum life cycle,this paper first needs to test the existence of the momentum life cycle of the stock price;Secondly,it is necessary to recognize the phases of the momentum life cycle,that is,the need to identify the transformation of momentum and reversal effect;Finally,we need to build a market timing strategy based on the recognition results of the momentum life cycle stage,and evaluate the effectiveness of the strategy.Therefore,the main contents and main conclusions of this thesis are as follows:Firstly,based on the existence of the life cycle of stock price momentum,this paper carries out an empirical analysis based on mobile entropy dimension.The results show that momentum life cycle is widespread.The main content of this part is: by introducing the fractal theory,the entropy dimension theory model is introduced,and the entropy dimension is used to make empirical research on the existence and characteristics of the life cycle of the momentum of the stock price,so as to lay an empirical basis for the further identification of the phase of the price momentum life cycle.Secondly,in view of the recognition of the life cycle phase of the stock price momentum,this paper constructs the mobile trend entropy dimension to identify the stock price momentum life cycle stage.The results show that the mobile trend entropy dimension can be used as a recognition measure for the momentum lifecycle stage.The main content of this part is: building the identification index of the momentum life cycle of the stock price,using the entropy dimension of the mobile trend to identify the existence interval of the momentum life cycle accurately,so as to make an empirical paving for the market timing of the next step of the price momentum life cycle.Finally,Identification of the phase of the life cycle of the momentum of the stock price,this paper builds an effective market timing strategy based on the identification of the momentum life cycle of the stock price by using the moving trend entropy dimension.The results show that the market timing strategy based on stock price momentum life cycle is effective and robust.The main content of this part is: on the basis of the effective identification of the stage of the stock price momentum life cycle,we use the momentum and reversal effect and the relative low and relative position of the stock price in the process of mutual conversion,and build the market timing strategy to provide the investors with the decision reference for the appropriate market timing.Compared with the research literatures and methods that have been used to study momentum and reversal effects,the innovations of this paper are:First,this paper studies the momentum effect and reversal effect in the momentum life cycle of the stock price as two different life stages in the whole.It makes up the shortage of the existing research that separates the two and leads to "see only the trees and not see the forest".This paper studies the trend of stock price fluctuation from the perspective of momentum life cycle,and develops a new way to study the trend of stock market volatility.Secondly,the nonlinear method(entropy dimension / trend entropy dimension)is introduced to study the stock price momentum life cycle.By introducing the entropy dimension of fractal theory to study the momentum life cycle of stock price,we can effectively improve the shortage of existing research on the separation of classic finance and behavioral finance.At the same time,it gives a strong proof of the existence of momentum and reversal effect,and expands a study of the life cycle of stock price momentum.