An Empirical Analysis of Price Momentum Effect in A-share Market

Abstract

This article sorts the returns of listed companies in the A-share market from May 1991 to April 2022 over the past J months, selects winners and losers, constructs a zero investment portfolio, and holds it for K months. The results showed that there is a reversal effect in the short term and a momentum effect in the medium to long term. Only when the holding period is one month, no obvious pattern can be observed. This article is interested in the combination of winners and losers with a holding period of one month. Next, Fama-MacBeth regression is used to further verify whether there is momentum effect in the A-share market when the holding period is one month. It was found that when the holding period is one month, there is no momentum effect in the A-share market, and there is a significant reversal effect in the short to medium term. In addition to the reversal effect in the short to medium term, winners and losers also experience a reversal in the long term. Taking the split share structure reform as the dividing point, winners and losers only have mid-term and long-term reversals before the reform, and there will also be short-term reversals after the reform. In addition, winners and losers have short-term and long-term reversals during bull markets, while bear markets have neither momentum nor reversal effects, while volatile markets only have short-term reversals.