Shui Liu
ABSTRACT
The momentum stock-selection investment came into light with the broadening of the idea of quantum investment. The existing practice of momentum investment on the Chinese market mostly focuses on mid-short time intervals. The problem remains whether there is possibility of applying momentum strategy on a mid-long time interval, and if the strategy be profitable and risk-free, or at least, be steady. In this paper, we present the practice of momentum investment based on the history data of Chinese stock market by stretching the time interval to a mid-long term, and evaluate the profitability with back-testing over history data. We carried out our experiment by three steps: set the amount of holding stocks (which is 10 in our experiment), select the stock with the momentum strategy, and re-arrange our holding stocks after a certain time-frame. Our experiment showed that the new investment strategy has a profit rate of 134.83%, annualized rate of profit at 33.8% and its Sharpe ratio is at 0.785, which means that the mid-long term momentum strategy is appliable in the Chinese stock market, and it can be both profitable and steady.
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