INVESTMENT PERFORMANCE OF INERTIAL AND REVERSAL STRATEGIES IN CHINA STOCK MARKET

Abstract

The phenomenon of inertia and reversal in stock market has been widely concerned by scholars since its discovery, which has become an anomaly under the theory of efficient market. At present, the research on the two phenomena in domestic academic
circles is still at the initial stage, and basically focuses on the test of the manifestations of these two phenomena and the research conclusions are very different. There areonly sporadic discussions on the reasons for the formation of these two phenomena.
The Chinese stock market with investment performance is an emerging securities market, which is quite different from the mature stock market in terms of background, trading system and investor composition.

Based on the theory of market effectiveness and behavioral finance, this paper studies the inertia and reversal strategies of the stock market from the perspective of return rate and abnormal return on the basis of previous studies on the inertia and reversal strategies of the stock market by scholars. Firstly, this paper introduces the origin and theoretical basis of researches on inertia and reversal strategies of stock market at home and abroad, namely, efficient market theory and behavioral finance theory.

Secondly, the paper analyzes the return performance of inertia and reversal strategies in Chinese stock market from the perspective of return rate, and verifies the existence of strategies. USES the cross section analysis method study of the causes of reversal strategies yield performance differences in different periods, and from two aspects: financial risk pricing and behavior, using CAPM model, the empirical analysis value reversal strategy revenue-generating mechanism, inertia and inversion strategy profitable and its internal mechanism is the main content of this thesis research and innovation points. Finally, the paper concludes that the phenomenon of stock market reversal in China is universal, which provides ideas for constructing profitable trading strategies.