Based On Price And Volume Of The Bottom Position Construction Strategy

After years of development,the China stock market has get part of functions and features of security market,but still need further progress compared to developed countries' markets.Refer to whether china stock market is consisted with the Efficient Market Hypothesis,the academics haven't have a uniform opinion.The emerging of behavioral finance gives some good explanations to lots of abnormal phenomenon that happened on security market,and many of those explanations are coinciding with the current situation or background of Chinese market.T Investing Company has a full of experience and practiced trading strategy on the U.S stock market,especially in day high-frequency trading,but the company has encountered some obstacles when engaged in Chinese market.For example,the Chinese doesn't have an effective short mechanism;the capital can't be rotated inner a day,etc.So the company has to find some ways to solve those problems,and one of the ways is building their own stock basket as initial position.This paper based on two abnormal phenomenon of financial market,which are Momentum Effect and Reversal Effect,meanwhile adding Trading Volume as another factor into the effect to test the China stock market's history trading data,in purpose to provide some relevant advices for building the stock basket.The paper selected all of the stocks which are listed on the main board market from January 2000 to April 2014 as the test sample.Tested the Momentum Effect in intermediate period by using monthly data and tested the Reversal Effect in short period by using weekly data.When adding in the volume factor into the test,this paper used the method that was used by Lee and Swaminathan(2000)in their paper.The result shows that the China stock market has significant Reversal Effect in short period and the effects in intermediate period are unobvious.Trading Volume has both same and different impaction on stock's future return compared between those two effects.Finally,based on the results of the test and analysis,combined with the requirements of high frequency trading strategy of T Investing Company,such as liquidity and volatility,this paper offered a conclusion of stock basket building strategy to T Investing Company for its further development.