Research On Trading Strategies Based On Investors' Continuous Attention

At present,China's stock market momentum strategy cannot make long-term stable profits,and many relevant literatures also ignore the impact of macroeconomics on investors' trading preferences and investment confidence.Investors' attention is often considered to be limited,but whether this limited attention will be continuously poured into the stock market by investors and transferred between individual stocks is uncertain.Therefore,based on the above deficiencies,this article analyzes China's stock market and tries to find a more practical trading strategy to solve the problem that momentum strategy cannot make a long-term stable profit.By dividing investors in the market into informed traders,followers and technical traders,combining the characteristics of different stages of the macroeconomic cycle,comprehensively considering the investment choices that different investors may make,assuming that the insiders are not affected by the macroeconomic cycle In addition to being affected by changes in the volume and price of the stock itself,the followers and technical traders are also affected by the macroeconomic situation.When the macro economy turns from prosperity to recession,the confidence of the followers and technical traders weakens,and they will choose to strictly control positions and even wait and see;when the macro economy gradually recovers and transitions to prosperity,the confidence of follower traders and technical traders is gradually increasing.When they find that stocks have changed in volume and price,they often choose to take the initiative.After informed traders obtain information,their attention will be continuously poured into the relevant stocks.Since these stocks have not been noticed by other types of investors,they have received little continuous attention.However,as the funds of informed traders entered,the stock price changed,which attracted the attention of followers.The follower's operation lead to a further increase in the volume and price of the stock.This phenomenon will soon enter the horizon of technical investors.Eventually,the continued attention of investors shifted among the stocks in the market.Investors' attention will not be restricted by the industry in the process of transferring.Because investors shift their attention between different stocks,stocks with lower attention will get more attention in the future,and their profitability will become better;stocks with higher attention may lose some attention in the future,Their profitability has deteriorated.The shift in investor attention leads to reversal and momentum in different stocks.Investors' attention is shifted among stocks in the entire market.Speed and period are difficult to determine,which also makes it difficult for momentum and reversal strategies to determine the holding period.Based on these assumptions,inspired by the theory of continuous overreaction and limited investors' attention,this paper builds a continuous attention(CA)factor.This article uses the constructed CA factor to construct a series of trading strategies,select strategies that can achieve stable profits in different economic cycles,and test the effectiveness of the CA factor.The empirical results show that without controlling the industry,in the first month after the formation of the portfolio,buy a low-CA portfolio and sell a high-C A portfolio can obtain stable positive returns.Other strategies are difficult to obtain stable excess returns.In the case of buying stocks in popular industries to reduce the impact of industry rotation,buying low-CA investment portfolios in hot industries will be profitable in the next 1-6 months,but the overall performance of the strategy is not good.It shows that investors' continuous attention will be transferred between individual stocks within the monthly frequency.This transfer will make the stocks with low continuous closes more profitable in the next month than the stocks with high continuous attention.The transfer of investors' continuous attention is not limited to a certain industry,but is transferred between individual stocks in the entire market.Based on the theories of investor's continuous overreaction and limited attention,comprehensively considering the operating habits of different types of investors in different economic cycle environments,constructing the CA factor,and using this factor to construct multiple trading strategies.Under different economic cycles,the performance of different trading strategies is analyzed,and finally,investment strategies that can make profits in different economic cycles are found.This paper also illustrates the effectiveness of the CA factor through experiments.These are the main contributions of this article.