Evaluating the profitability of contrarian vs. momentum strategies in China's stock market

Abstract

This paper focuses on the profitability of short term and medium-term momentum and contrarian effect in Chinese capital market. The result of the research shows the theory that momentum and contrarian effects exist in Chinese capital market. Using momentum strategies and contrarian strategies could earn abnormal return under different investment methods. In addition, the profitability of momentum and contrarian strategies based on different market caps is also evaluated. The regression analysis reveals that historical returns contribute the most to momentum return.