An Empirical Study of Momentum Strategy and Contrarian Strategy in Bull and Bear Market in China
Date Issued
2014
Date
2014
Author(s)
Lo, Wen-Chieh
Abstract
This thesis tests and verifies contrarian strategies conceived by De Bondt and Thaler (2000)’s method and momentum strategies conceived by Jegadeesh and Titman (1993)’s method. In the meantime, trading volume plays an important role in deciding the return pattern of stocks. In this paper, I also investigate the profitability of volume-based momentum strategy and contrarian strategy by way of empirical analysis. I combine these two aspects together to test in bull and bear market in China.
Below are my main findings. Firstly, the simple price contrarian effect exists in China stock market. After adding the volume element into strategies, the test results conform the hypothesis of Momentum Life Cycle (MLC). Secondly, in terms of trading volume, stocks with low trading volume exhibit higher contrarian returns than stocks with high trading volume. As far as past return is concerned, low-volume portfolios perform well, especially in loser groups. Finally, high-volume portfolios exhibit significant contrarian effect in bull market, while portfolios with both high and low trading volumes exhibit significant momentum effect in bear market.
Subjects
中國大陸
動能策略
反向策略
交易量
牛熊市
Type
thesis
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