Study Of MAX Effect And Stock Selection Strategy

With the continuous development of capital market,a large number of research results have emerged in the field of asset pricing theory research.The traditional CAPM model makes it difficult to establish in the real world because of too many assumptions,and then there are APT models with fewer assumptions,but the APT model does not indicate what factors affect asset pricing.Finding factors that have a significant impact on stock earnings has become the focus of research in the field of asset pricing,the most representative models are Fama-French three-factor and five-factor model.The MAX factor is a measure of investor stakes,defined as the maximum yield of the day in all trading days of the previous month.This paper found that the MAX factor is significantly negatively correlated with the next issue of stock yield,which is consistent with the MAX effect of other stock markets.A multi-angle study has been carried out,including lottery theory,cumulative prospect theory and investor sentiment theory.This paper further studies the existence of the MAX effect of the A-share market,first of all,the stock yield is grouped according to the MAX factor,whether by market value weighting or equal weight grouping,the yield of the high MAX factor group is significantly lower than the yield of the low MAX factor group.It can be considered that the MAX effect in the A-share market exists.Finally,this paper further studies the causes of the MAX effect in the A-share market,and finds that the three factors of liquidity,heterogeneous bias and investor sentiment together influence the degree of the MAX effect.Based on the conclusions above,this paper build a four-factor stock selection model,the results show that the model is effective.