The Study Of 52-Week-Low Effect Of China’s A-Share Market

China’s A-share market is an important part of China’s financial market.Since the formal operation of the Shanghai Stock Exchange in 1990,it has gone through 28 years.Whether it is at the macro level of facilitating enterprises to reduce financing costs,thereby coordinating the allocation of economic resources and promoting industrial development,or at the level of meeting the wealth management needs arising from the increasing income level of the public and providing more individualized and diversified investment channels,the role of the stock market is becoming more and more important,which is the policy focus of the current financial system reform.Great’ academic research value.One of the important premises for the financial system to play its role in resource allocation is effective market pricing.However,there are various pricing anomalies in the capital market for a long time.According to the efficient market hypothesis,the current stock price should contain all historical information,that is,any investment strategy constructed by the stock price should be ineffective and can not obtain significant excess returns.However,this is not the case.There are many price anomalies that can not be explained by traditional theories in the market,and they have gradually become the focus of financial research,such as momentum effect,small-cap stock effect,calendar effect,turnover rate effect and so on."52-week maximum/minimum price" as a frequent symbol price in financial media,to a certain extent,affects the market participants’investment and trading decisions.Whether this important price information will have an impact on the trend of stock prices,its research results are of great significance to enrich the relevant theories of asset pricing.In the study of this problem,some scholars have found the 52-week maximum price effect,also known as the new momentum strategy,which means that the stock price tends to keep rising after approaching or breaking the 52-week maximum price.The theoretical explanations of this effect in literature mainly focus on behavioral finance,such as anchoring-adjustment theory.According to similar logic,we believe that the 52-week minimum price is also a special price worthy of attention.It should also have some reference significance for predicting stock returns.At the same time,considering the particularity of China’s stock market system and environment,we may be able to find unique pricing anomalies and impact mechanisms.This paper will study the above problems according to the ideas of literature reviewtheoretical analysis-Empirical Test-further research-putting forward conclusions and suggestions.Firstly,this paper reviews the theory of 52-week maximum price effect,and holds that this theory may not be directly applied to 52-week minimum price effect in Ashare market.Therefore,nominal price illusion theory and shell resource value theory related to market characteristics are introduced.In the part of empirical research,this paper takes the monthly trading data of A-share listed companies in Shanghai and Shenzhen Stock Exchanges from January 2001 to December 2018 as the sample,constructs the trading strategy portfolio with the ratio of the stock price to the lowest price in the previous 52 weeks as the index,and adopts control variables,rolling trading model,single/bivariate grouping,Fama-MacBeth regression and other methods to observe the trading strategy group.The significance of the combined excess return and correlation coefficient proves that there is a 52-week minimum price effect in A-share market:when the stock price is low and hovering near the lowest point in the past 52 weeks,there is a great possibility to obtain positive returns in the future,that is,stocks close to the lowest price in 52 weeks will produce higher returns than stocks far from the lowest price in 52 weeks.The above 52-week minimum price effect can not be explained by traditional pricing models such as CAPM model and Fama-French five-factor model.It still exists after adding control variables such as circulation market value,turnover rate and momentum,and there is no seasonal effect.In further research,this paper argues that the anchoradjustment theory and the transmission mechanism of disposal effect can not be applied to the 52-week minimum price effect.Therefore,considering the particularity of China’s market environment,this paper attempts to analyze from the perspective of nominal price illusion and the value of shell resources of listed companies.Firstly,because of the similarity between the stocks involved in the 52-week minimum price effect and the low-price stocks to some extent,it is found that the price anomaly can be partly explained by adding relevant variables to the test.Further,this paper argues that the backdoor trading under the current listing mechanism gives listed companies special value of shell resources,and it is likely to be one of the reasons for the 52-week minimum price effect.By introducing the shell value ratio for bivariate grouping and Fama-MacBeth regression,this paper preliminarily confirms this conjecture:in bivariate grouping,the lowest price effect disappears after 52 weeks of controlling the shell value ratio;Fama-MacBeth regression results also show that the shell value ratio has a significant impact on stock returns.Finally,this paper summarizes the main conclusions of the article,and puts forward some policy recommendations on the issues involved.