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Momentum and Contrarian Trading Strategies: Evidence from the Chinese stock market 2000-2010

Shi, Chaoqiong LU (2011) NEKM07 20111
Department of Economics
Abstract (Swedish)
The paper employs Jegadeesh and Titman (1993)’s overlapping ranking period method to build winner-portfolio and loser-portfolio, and thereafter conducts empirical studies on the momentum and contrarian effects on the Chinese stock market from 2000 to 2010. One thing worth mentioning here is that the author processes the data using her own Matlab codes instead of doing tremendous manual work.
It is found in this paper that the Chinese stock market has short-term features, and is mainly characterized by a strong contrarian effect and supplemented by a weak momentum effect, and the whole market exhibits a unilateral feature. In the short and medium term, the contrarian effect is significant in the Chinese stock market; with the extension... (More)
The paper employs Jegadeesh and Titman (1993)’s overlapping ranking period method to build winner-portfolio and loser-portfolio, and thereafter conducts empirical studies on the momentum and contrarian effects on the Chinese stock market from 2000 to 2010. One thing worth mentioning here is that the author processes the data using her own Matlab codes instead of doing tremendous manual work.
It is found in this paper that the Chinese stock market has short-term features, and is mainly characterized by a strong contrarian effect and supplemented by a weak momentum effect, and the whole market exhibits a unilateral feature. In the short and medium term, the contrarian effect is significant in the Chinese stock market; with the extension of the holding period, however, the contrarian effect weakens and certain momentum effects become significant.
In addition, the paper has tried to analyze the causes of the momentum and contrarian effects on the Chinese stock market. First, within the efficient market paradigm, the author uses CAPM to adjust for portfolio risk, and finds that this model cannot explain the two effects. Second, the two effects are analyzed from the perspective of behavioral finance. The empirical studies reveal that the underreaction of investors results in a momentum effect, and their overreaction results in a contrarian effect. (Less)
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author
Shi, Chaoqiong LU
supervisor
organization
course
NEKM07 20111
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Contrarian effect, Momentum effect, The relative strength portfolio, CAPM model, Overreaction, Underreaction.
language
English
id
1988303
date added to LUP
2011-06-28 08:42:57
date last changed
2011-06-28 08:42:57
@misc{1988303,
  abstract     = {The paper employs Jegadeesh and Titman (1993)’s overlapping ranking period method to build winner-portfolio and loser-portfolio, and thereafter conducts empirical studies on the momentum and contrarian effects on the Chinese stock market from 2000 to 2010. One thing worth mentioning here is that the author processes the data using her own Matlab codes instead of doing tremendous manual work.
    It is found in this paper that the Chinese stock market has short-term features, and is mainly characterized by a strong contrarian effect and supplemented by a weak momentum effect, and the whole market exhibits a unilateral feature. In the short and medium term, the contrarian effect is significant in the Chinese stock market; with the extension of the holding period, however, the contrarian effect weakens and certain momentum effects become significant.
    In addition, the paper has tried to analyze the causes of the momentum and contrarian effects on the Chinese stock market. First, within the efficient market paradigm, the author uses CAPM to adjust for portfolio risk, and finds that this model cannot explain the two effects. Second, the two effects are analyzed from the perspective of behavioral finance. The empirical studies reveal that the underreaction of investors results in a momentum effect, and their overreaction results in a contrarian effect.},
  author       = {Shi, Chaoqiong},
  keyword      = {Contrarian effect,Momentum effect,The relative strength portfolio,CAPM model,Overreaction,Underreaction.},
  language     = {eng},
  note         = {Student Paper},
  title        = {Momentum and Contrarian Trading Strategies: Evidence from the Chinese stock market 2000-2010},
  year         = {2011},
}