Research On The Month-of-the-Year Effect Of Chinese Stock Market From Multiple Perspectives

After the Efficient Markets Hypothesis was put forward,it was questioned from all sides.The endless market anomalies was discovered by scholars and challenged the Efficient Markets Hypothesis.The month-of-the-year effect is a typical representative of the market anomalies,which is widely found in the world’s major stock markets.The mature market represented by the US stock market shows a January effect.In other markets,the performance of the monthof-the-year effect varies depending on the specific situation.Whether there are the month-of-the-year effect scholars in the Chinese stock market hold different views.The month-of-the-year effect theory is extremely strong,and it is widely used in both market analysis and investment strategy selection.It is a hot topic for securities analysts and investors.Regrettably,some kinds of media are full of various the month-of-the-year effects,most of which lack theoretical basis and data support,causing many troubles for investors.Due to the late start of Chinese stock market,the previous studies often have insufficient sample size and poor model fitting,which makes the conclusion credibility low.In order to make up for this deficiency,this paper selects the Shanghai Composite Index and Shenzhen Composite Index and the Shenyin & Wanguo Scale Index and Industry Index from January 2000 to June 2018 as research samples.Using the GED-EGARCH-M model,the month-of-the-year effects were studied from both time and sample perspectives.The empirical results show that the month-of-the-year effects of the Chinese stock market are not static and are constantly evolving.On the whole,the February and June yields in the Chinese market are significantly different from those in other months.In February,it was mainly affected by the high risk aversion of investors before the Spring Festival and the loosening of funds in the post-holiday market,which made the portfolio probable to obtain excess returns.Under the multiple effects of seasonal factors,holiday factors and policy factors,the stock market’s downward trend in June was obvious,and investment losses were more likely to occur than in other months.In addition,under the influence of industry factors,stocks in different industries often show some monthly effects with industry characteristics.In summary,based on the two dimensions of time and sample,this paper examines the month-of-the-year effect of Chinese stock market from three different perspectives: trading market,company size and industry classification.From the perspective of robustness,the existence of any kind of the month-of-theyear effect is not absolutely stable.In addition,the index yield is low and the risk is high in these special months,so the theory is not suitable as a tool for investors to arbitrage.In order to create a good investment environment,it is necessary to gradually improve the effectiveness of the Chinese stock market by improving the quality of investors,strengthening market supervision and optimizing market structure.In the next step,we should ensure the comprehensiveness and real-time of the research sample,follow up the latest model theory and research methods,pay attention to the performance of the month-of-the-year effect in the market segment,and describe the development trend of the month-of-the-year effect in the Chinese market.