Research And Exploration On The Momentum Effect Of China's A-Share Market

The momentum effect is a phenomenon in which the price trend of the capital market continues,that is,buying relatively strong stocks in the early stage and selling the relatively weak stocks in the previous period can obtain excess returns.The existence of momentum effects is generally explained by investors' insufficient reaction to information and the promotion of trends by technology traders.If the momentum effect exists,it indicates that the price has some predictability.The research in foreign theoretical circles shows that the momentum effect in the international capital market is extensive and stable,which strongly challenges the effective market hypothesis EMH.In terms of research related to the domestic market,there are wide differences in the existence and characteristics of the momentum effect,which is troublesome for understanding the effectiveness of China's capital market and constructing corresponding investment strategies.The market boards of different levels of A-shares bear the different missions of capital market construction,thus this article selected to focus on the exploreation of the operational rules and characteristics of the momentum effects of market boards at all levels,the effectiveness of recent capital markets,and strategies that investors should adopt correspondingly.Specifically,this paper firstly examines the relationship between the momentum effect and the investment value of the market by using the one-dimensional linear regression method for the time series data of the stock returns of China's A-share market from 2000 to 2018.Secondly,using more than one million sample of A-shares stock returns data in 2010-2018 through the improved JT momentum model and programmatic data processing methods to analyze and compare the momentum effect of the main board,small and medium-sized board,and GEM board.This study found that the overall momentum effect of the A-share market is weakened in the long-term trend,and stronger in GEM board compare to SME board,stronger in SME board compare to main board.The momentum effect exists in much shorter period and much smaller range,e.g.the formation period and holding period are 1 to several weeks,and the existence range is about 2% of the stock quantity,which is very different from the international capital market.The study concluded that the long-term weakening trend of the momentum effect of the A-share market reflects the gradual increase in the effectiveness of China's capital market,reflecting the recent trend of investment styles shifting from technology investment to value investment,GEM and SMB boards are relatively more suitable for technology investment strategies,and the main board should focus on value investment.The research results show that the efforts of China's capital market supervision and optimization are effective,and the overall investment style is shifting toward rational investment.