An Empirical Study On Short-term Momentum Of China's Sub-new Stock

The Efficient Market Hypothesis(EMH)and Capital Asset Pricing Model(CAPM)have long been the two foundations of mainstream finance theory,but since the 1980 s,many scholars have questioned the efficient market hypothesis.On the one hand,the market is not completely effective,and investors are not completely rational;on the other hand,investors have inertial trading,and irrational trading behavior in the market cannot be eliminated because of a large number of random transactions.In the empirical evidence,more and more market visions have been discovered by scholars.These visions cannot be reasonably explained by the above theoretical model,and the momentum effect and the reversal effect are the most typical visions in the market.The reversal effect was first proposed by DeBondt & Thaler(1985).They studied all the stocks listed on the New York Stock Exchange between 1926 and 1982 and found 35 stocks with poor performance when the observation period was 3 to 5 years.In the future,the yield will be higher in the holding period of 3 to 5 years;the 35 stocks with better performance(winners' combination)will reverse the yield,and then propose a long-term reversal effect in the US stock market.The momentum effect was first proposed by Jegadeesh & Titman(1993).They found that in the US stock market between 1965 and 1989,when the observation period and the holding period were 1 to 4 quarters,the winners who bought the same market value were sold.After the zero cost combination of the same market capitalization of the loser combination,it has a significant momentum effect in the holding period.In general,the results of foreign scholars show that there are indeed medium and long-term momentum and reversal effects in foreign stock markets.The domestic scholars' research on China's stock market shows that China's securities market has short-term momentum effects and long-term reversal effects.On the other hand,domestic and foreign studies have shown that traditional financial models can not quantitatively explain the causes of momentum and reversal effects,and behavioral finance models can logically explain the causes of momentum and reversal effects.Therefore,based on the previous research ideas and foundations,this paper attempts to deeply explore the short-term momentum and reversal effects of China's sub-new stock market.There are three main reasons: First,after canceling the new share subscription and payment system and purchasing policies according to market value,the research on the existence of short-term momentum and reversal effect of China's secondary stock market is in a blank;secondly,the previous research on the secondary stock market is mainly Focusing on the issue of IPO underpricing and the long-term weakness of sub-new stocks,there are few studies on the trend of sub-new stock prices in less than one year.Third,the current research on momentum and reversal effects is mainly concentrated in the main board market.In the small and mediumsized board market and the GEM market,and the research interval is mainly monthly,quarterly and annual,there are few studies on the sub-new stock market and weekly data.Based on the above reasons,this paper wants to deeply explore the existence,cross-sectional differences and causes of the short-term momentum and reversal effects of China's sub-new stocks,and proposes two hypotheses: Hypothesis 1,the implementation of the cancellation of the new share subscription prepayment system and After the market value purchase policy,the short-term new stocks have a momentum effect in the short-term;hypothesis 2,the smaller the market capitalization,the more significant the momentum effect in the short term.In this paper,the empirical model of Jegadeesh & Titman(1993)is used to select the sub-new stocks in the research interval from January 2016 to June 2018 as the basic sample to construct a short-term investment strategy(J,K),where J is the observation period and K is the holding period.In the period,the observation period is selected as 1,2,3,and 4 weeks,and the holding period is selected as 1,3,6,9,and 12 weeks.The observation period and the holding period are composed of 20 investment portfolios,and non-The overlapping sampling method has carried out in-depth research on the short-term momentum and reversal effects of China's sub-new stocks.The empirical results show that after the implementation of the new share purchase prepayment system and the purchase of the new policy according to the market value,the short-term momentum effect of China's sub-new stock market has a short-term momentum effect,and the momentum effect is more significant with the increase of the observation period.This conclusion verifies the hypothesis 1 of this paper;The short-term momentum effect of the sub-new stocks under the GEM market and the small market capitalization is more obvious.The above analysis verifies the hypothesis 2 of this paper.At the same time,it is found that the cause of the short-term momentum effect of China's sub-new stocks can not be well explained under the theory of effective market theory,but can be reasonably explained under the theory of behavioral finance theory,although the three behavioral finance models can not fully explain all The performance of the next new stock in the market can explain the momentum and reversal effect of the next new stock in some market conditions.Finally,there are certain deficiencies in the research of this paper.Firstly,the empirical model is too idealistic,and the impact of transaction cost on the momentum and reversal effect of portfolio is not considered.Secondly,the causes of momentum and reversal effects are not deeply explored.When the traditional finance model explains the cause of the momentum effect of China's sub-new stocks,only the single-factor CAPM model is used for testing.However,the influence of SMB,HML and other factors on the regression model is not explored,and it needs to be improved and improved in future research.