Dissertation > Excellent graduate degree dissertation topics show

Empirical Research on Momentum Effect and Reversal Effect in China Stock Market

Author: GuoZuoZuo
Tutor: PanQingMu
School: Southwestern University of Finance and Economics
Course: Finance
Keywords: Momentum Effect Reversal Effect over-reaction under-reaction Behavioral Finance
CLC: F224
Type: Master's thesis
Year: 2011
Downloads: 74
Quote: 0
Read: Download Dissertation


The discovery of momentum effect and reversal effect means that stock prices has a trend and can be predicted, which conflicts with the Efficient Market Hypothesis. As one of basics of the traditional finance the Efficient Market Hypothesis believes:investors are fully rational, transactions are randomly occurring and investors can arbitrage without risk infinitely. However it is hard to explain the momentum effect and the reversal effect by the Efficient Market Hypothesis. Behavioral finance combined with the psychology and other disciplines relaxes the assumptions of the Efficient Market Hypothesis. Human’s bounded rationality, crowd behavior and incomplete market are three fundamental assumptions of Behavioral finance. Behavioral finance which successfully explained momentum effect and reversal effect think it was the result of human cognition and behavior bias in decision-making which makes investors made irrational behavior, so that the stock price appears short-term momentum and long-term reversal. Of course, such deviation caused by momentum effect can’t last all the time, the rational investors will fix this error after excessive deviation and reversal effect make price return to the intrinsic value gradually. So this paper analyzes investors’cognitions and emotions and decision-making process, and then uses BSV model, DHS model and HS model to explain the momentum effect and reversal effect.In this paper, the empirical study examines all of China’s A-shares in Shanghai and Shenzhen stock markets in May 1997-April 2010. The Chinese stock market empirical study result shows that the momentum effect and reversal effect in our country are complicated. In the short term, the winner portfolio has a momentum effect, but unexpectedly, the loser portfolio in the short term has a reversal effect instead of momentum effect and earn positive excess yield. Over the long term, the loser portfolio and zero cost investment portfolio appears strong reversal and consistent with the theoretical expectations and the findings of others, but the winner portfolio doesn’t appears strong reversal.The empirical results can be explained from the following reasons:Stock turnover rate is very high in China’s stock market; Most investors prefer speculating to investing; Disposition effect is serious and investors hold stocks which have losses for too long but sell stocks which have gains too early; There are many makers manipulation, insider stock trading; There are a large number of retail investors who generally overconfidence; The stock market is immature, and stock price always rises and falls quickly and sharply and deviate from intrinsic value too much; Without sell-short mechanism, China’s stocks are always rise at the same time and fall at another same time. These conclusions will help us better understand China stock market and investors in China.

Related Dissertations

  1. Preparation and Photocatalytic Properties for Water Decomposition of Titanate Photocatalyst,O643.36
  2. Study on the Degradation of Unsaturated Polyester Resin and Fiber Reinforced Polymer in Hot Compressed Water,TQ320.1
  3. Study on the Fluorescence Analysis of Penicillins Antibiotics,R155.5
  4. Construction of the Recombinant of HSV-2gD Minotope、 HBsAg、 IL-18 DNA Vaccines and Its Inducing Immune Respons in Mice,R392
  5. The Research on the Comprehensive Modification Technology of Rice Protein Enzymatichydrolysis and Graft Copolymerization,TS201.2
  6. Effects of Low Molecular Organic Acids on Immobilazition of Lead Ions by Nanosized Hydroxyapatite,S153
  7. Indirect Imaging of Singlet Oxygen Generation from a Single Cell,Q2-3
  8. Effect on Soybean Leaf Light Energy Distribution and Changes in the Characteristics of Anti-Photoinhibition in the Condition of Chlorophyll Defcient,S565.1
  9. The Dynamical Evaluation of Three Methods to Diagnose Mycoplasma Pneumoniae Infection in Children,R725.6
  10. Study of the Water-Inrush Mechanism and Prediction of the Water-Resisting Floor,TQ133.1
  11. The Significance of Ras Protein Expression and Gene Mutation in Skin Pathological Scar and Scar Carcinoma Tissues,R739.5
  12. Research on the Drug Recall System in China,F203
  13. The Momentum and Contrarian Effect in China Stock Market,F224
  14. Studies on Physiological Reactions in Adverse Circumstances of Submerged Plants and Their Purifying Functions,X173
  15. Studies on Fabrication of Superhydrophobic with High Adhesion Force Surface on Aluminum Substrates,TG174.4
  16. Organic acids control the synthesis of polyaniline satisfied / micron-sized structures,TB383.1
  17. The Synthesis and Biological Evaluation of Novel Amino-linked Nucleoside Derivatives,TQ460.1
  18. Synthysis and Cure Kinetics of Imine and 1, 4-Dihydroxy-benzene Liquid Crystalline Epoxy Resins,TQ323.5
  19. Intermolecular Hydrogen Transfer and C-H Activation by Means of Palladium-catalyzed Domino Reaction,O643.32
  20. The Mechanism of the Degradation of DNS and Its Kinetics,O643.12

CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
© 2012 www.DissertationTopic.Net  Mobile