Momentum effect based on stochastic dominance theory —— Evidence from Chinese Shanghai Stock Exchange A-share

Liang Zhou; Tian Tian

Proceedings of the 5th International Conference on E-Commerce and Internet Technology, ECIT 2024, March 15–17, 2024, Changsha, China

Research Article

Momentum effect based on stochastic dominance theory —— Evidence from Chinese Shanghai Stock Exchange A-share

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Cite: BibTeX Plain Text

@INPROCEEDINGS{10.4108/eai.15-3-2024.2346188,
    author={Liang  Zhou and Tian  Tian},
    title={Momentum effect based on stochastic dominance theory ------ Evidence from Chinese Shanghai Stock Exchange A-share},
    proceedings={Proceedings of the 5th International Conference on E-Commerce and Internet Technology, ECIT 2024, March 15--17, 2024, Changsha, China},
    publisher={EAI},
    proceedings_a={ECIT},
    year={2024},
    month={5},
    keywords={stochastic dominance; portfolio optimization; momentum effect},
    doi={10.4108/eai.15-3-2024.2346188}
}

Liang Zhou
Tian Tian
Year: 2024
Momentum effect based on stochastic dominance theory —— Evidence from Chinese Shanghai Stock Exchange A-share
ECIT
EAI
DOI: 10.4108/eai.15-3-2024.2346188

Liang Zhou¹^,*, Tian Tian¹

1: Hangzhou Normal University

*Contact email: 949910883@qq.com

Abstract

This paper employs portfolio optimization models based on second-order stochastic dominance and "super-convex" third-order stochastic dominance, comparing them with an equal-weight portfolio optimization model. Through the computation of out-of-sample indicators for portfolio evaluation, it is found that, in the Shanghai Stock Exchange A-share market, the portfolio based on stochastic dominance theory exhibits a significant momentum effect, leading to substantial excess returns when the formation period is relatively long compared to the benchmark returns.

Keywords: stochastic dominance; portfolio optimization; momentum effect

Published: 2024-05-30
Publisher: EAI

: http://dx.doi.org/10.4108/eai.15-3-2024.2346188