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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  • @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.