An Empirical Study On The Momentum Effect Of The Median Value In My Country’s Stock Market

The discovery of momentum effect is still one of the most powerful and lasting market anomalies in the financial field.The momentum effect has been verified in many countries,but whether there is momentum effect in China’s stock market is still controversial.Although there are a large number of domestic literatures on momentum effect,the traditional JT momentum strategy is still adopted in the construction of momentum strategy,that is,the cumulative return is used as the stock selection ranking index.Cumulative return ranking method is sensitive to extreme value or outlier,resulting in the momentum portfolio containing a large number of high beta value and small market capitalization stocks,which bear greater risk.In contrast,Median,which is less affected by extreme observations,is A better indicator to measure stock performance.A Median momentum strategy constructed by this method may be more suitable for China’s A-share market.Based on this,this paper uses the median of stock return to construct the median momentum strategy,and conducts an empirical study on the median momentum effect of China’s stock market.Firstly,in order to explore whether the A-share market has the effect of median momentum,this paper constructs the strategy of median momentum,and tests it under weekly and monthly frequency.We find that the market has significant short-term median momentum effect and medium and long-term reversal effect,and different market states have different effects on the median momentum effect,the median momentum effect is more significant in the bull market,and there is no median momentum effect in the bear market.At the same time,this paper also compared with the representative JT momentum effect,and found that compared with the JT momentum effect,the median momentum effect is more significant,the zero portfolio has a higher excess return,and the reversal suffered less loss.Secondly,on the basis of empirical evidence that the median momentum effect exists in A-share market,this paper analyzes by double ranking method and shows that the median factor realizes information gain compared with JT factor.Then,the median momentum return rate is regression for CAPM single-factor model,Fama-French three-factor model and Fama-French five-factor model.It is found that the traditional factor model can not explain this return well,indicating that the median momentum effect may be a market anomaly.Finally,this paper constructs the median strategy and the traditional JT strategy to conduct simulation trading through the Joinquant quantitative investment platform,showing the application effect of the two strategies in A stock market.In this paper,compared with the traditional JT strategy,does the median strategy gain higher returns and bear lower market risks in actual trading?The backtest shows that the median momentum strategy can obtain higher excess return,higher Sharpe ratio and smaller maximum retractions than the JT momentum strategy,which indicates that the excess return of the median strategy is not simply due to the high risk.The above conclusions indicate that there is still much room for improvement in the construction method of momentum strategy in the A-share market.The empirical study of median momentum effect in this paper provides A new perspective for the study of momentum effect in the A-share market.