A Study On The Momentum Effect And Reversal Effect Of Chinese Corporate Bonds

The efficient market theory hypothesis believes that investors cannot obtain excess returns by predicting and analyzing the historical information of assets when the market is effective,but the "momentum effect" and "reversal effect" that commonly appear in the securities market are against this hypothesis."Momentum effect" means that assets with higher returns in the past will continue to follow this order.Buying assets with high returns in the past and selling assets with low returns in the past can obtain excess returns.Conversely,the reverse order of returns The change is "reversal effect".The emergence of these two effects shows that the asset prices in the securities market may be affected by their historical returns,and thus doubts whether the market is a weak efficient market.Many foreign literatures have confirmed and analyzed the “momentum effect” and “reversal effect” in the bond market.However,the domestic literature mainly studies the stock market as the research object of the related effects.The effect lacks attention.This article investigates whether there is a momentum effect or a reversal effect in the Chinese bond market,and further analyzes its causes.This article refers to Jegadeesh and Titman(1993)and Novy-Marx(2012)'s momentum strategy construction method,using the monthly transaction data from January 2008 to December 2018 in the Chinese corporate bond market,to test from two different strategy construction methods: price momentum strategy and scale momentum strategy Whether there is a relevant effect in the Chinese corporate bond market,and whether there is a difference between the effects of investment-grade bonds and non-investment-grade bonds.The empirical results show that the Chinese corporate bond market exhibits a price reversal phenomenon in the short and medium term(1-9 months)and a momentum effect in the long term(9-12 months);the law of bond size on the momentum effect of bonds has Certain impact;compared to investment-grade bonds,non-investment bonds using momentum strategy will have more stable returns,and their Sharp ratio will also perform better.Can the momentum factor extracted based on the momentum effect be explained in the asset pricing model? The results of this paper show that in the comparison of the CAPM model,the CAPM model with momentum factor added,and the four-factor model with liquidity risk factor and maturity factor,The CAPM model with the momentum factor has a good explanation for the spread between the higher-momentum portfolio and non-investment-grade bonds;the coefficient of the momentum factor is significantly positive in the regression of the higher-momentum portfolio and the non-investment-grade bond portfolio.,And the conclusion that the above-mentioned corporate bond market has a reversal effect confirms each other.The results of this paper indicate that investors should pay attention to the risk of reversal effect when investing in the bond market,and should consider the impact of various factors such as momentum,bond size,and bond rating when constructing investment strategies.