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