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ID109908
Title ProperState of the market and the contrarian strategy
Other Title Informationevidence from China's stock market
LanguageENG
AuthorChen, Qiwei ;  Jiang, Ying ;  Li, Yuan
Publication2012.
Summary / Abstract (Note)Using the most comprehensive weekly dataset of 'A' shares listed on the Chinese stock market, this paper examines short-term contrarian strategies under different market states from 1995-2010. We find statistically significant profits from contrarian strategies, especially during the period after 2007, when China (along with other countries) experienced an economic downturn following the worldwide financial crisis. Our empirical evidence suggests that: (1) no significant profit is generated from either momentum or contrarian strategies in the intermediate horizon; (2) after microstructure effects are adjusted for, contrarian strategies with only four to eight weeks holding periods based on the stocks' previous four to eight week's performance generate statistically significant profits of around 0.2% per week; (3) the contrarian strategy following a 'down' market generates higher profit than those following an 'up' market, suggesting that a contrarian strategy could be used as a shelter when the market is in decline. The profits following a 'down' market are robust after risk adjustment.
`In' analytical NoteJournal of Chinese Economics and Business Studies Vol. 10, No. 1; Feb 2012: p.89-108
Journal SourceJournal of Chinese Economics and Business Studies Vol. 10, No. 1; Feb 2012: p.89-108
Key WordsContrarian and Momentum ;  Market States ;  China Stock Market ;  Overreaction ;  Common Factor