Asymmetry Of Intraday Reversal Effect In China

Firstly,this article introduces the efficient market hypothesis and points out some financial anomalies found in contemporary finance that violate the efficient market hypothesis.This phenomenon leads to the core research problem of this article-reversal effect.There are several interpretations of reversal effects,the best one for highfrequency reversal effects is Roll's spread model,but the model's premise and conclusion still have a large deviation from the real market.Based on the traditional spread model,the new model relaxes assumptions to obtain more general conclusions.The new model no longer restricts the probability of the stock price rising and falling.At the same time,the new model combines the relevant properties of loss aversion in behavioral finance theory to draw the following two conclusions: 1.(Existence of the reversal effect)Unless the stock price remains constant,the auto-correlation coefficient of the stock price is always negative.2.(Imbalance of reversal effect)Compared with holding stocks that have suffered losses,risk averse investors prefer selling stocks that have gained profits.In order to verify the spread model,this paper selects half-year data of the entire Chinese market to study the existence and imbalance of the reversal effect.The main method of studying existence is to formulate portfolio baskets based on different observation periods,and observe the factors that affect the return of portfolio.The results show that: 1.Chinese market's reversal effect in minute-data is remarkable.2.With the value of trading interval increasing,the reversal effect of stock declines.The method of studying imbalance is to construct reversal strategy and rebound strategy and compare the return of the two strategies.The results show that: 1.With the minute-data,the asymmetry in the intra-day reversal effect is remarkable.2.The willingness to hold stocks that have suffered losses will be less than the probability of selling stocks that have achieved equal returns,consistent with the conclusions based on the loss aversion spread model.