Research On The Applicability Of Reverse Operation In China's Stock Market

Compared to financial markets in Western developed countries,The development of China's financial markets,whether from participants,related financial instruments,or supporting financial systems,is not mature enough.In this imperfect financial environment,there are often some irrational fluctuations in China's financial markets,especially the stock market.And the irrational fluctuations in this market are often used by investors to obtain excess returns.In the case of such irrational fluctuations,reverse investment is undoubtedly an investment strategy that often leads investors to receive excess returns.Based on the irrational volatility that frequently occurs in China's stock market,the article will use behavioral finance to propose a reverse operation strategy for profitability testing in different stages of China's stock market development.According to the test results,retail investors in China's stock market will be provided with a more scientific and more operational investment strategy,thereby enriching the investment options of China's stock market participants.Through this scientific and rigorous investment,market participants not only can obtain a more substantial and stable income,but also can promote a relatively stable stock market.The research of the article is mainly based on the theory of cognitive bias and value revision,combined with the specific conditions of China's stock market,to study the applicability of reverse operations in China's stock market.The first is to review the domestic and foreign related documents of the reverse operation.Based on this,we summarize the existing research results and clarify the direction of this article.Then it will briefly describe the traditional financial theory and behavioral finance theory involved,and then select the investment strategy that suits China's stock market in light of the current status of China's stock market.Then we use the stock data of China's A-share market to conduct data statistics.First,we form stock portfolios under certain standards,and then we analyze the stock variance of stock portfolios.Finally,through the analysis of variance of returns,it is found that in the stock market of our country,through the reverse operation,it is possible to obtain better excess returns within a one-year period,and the effect is not obvious in one year or longer,and even the excess return is negative.At the same time,This article also attempts to optimize the reverse operation strategy by exploring the effects of portfolio risk,portfolio price-to-book ratio,and trading activity on reverse operating excess returns.so that the reverse operation combination can obtain better returns under lower risk conditions.