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Articles

Contrarian Effect of Semi-Parametric Alpha Strategy

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  • 1. School of Economics and Management, Northwest University, Xian, China;
    2. School of Statistics and Management, Shanghai University of Finance and Economics, Shanghai, China;
    3. Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, China

Received date: 2015-11-23

  Revised date: 2016-05-03

  Online published: 2017-03-07

Abstract

In this article, a semi-parametric alpha strategy model is proposed. The benefit of the proposed model is that the time-varying coefficient can explain the time point risk rather than the risk in a period of time. The local least square method is used to estimate time-varying coefficient and the estimate of alpha is easily derived by solving an estimating equation. Based on the semi-parametric model, the 30 low-ranking stock portfolios of alpha value are selected to observe the contrarian effect. It's found that the stock portfolio is better than market return and gain premium, showing the contrarian effect. The influence of the holding length and the stability of a stock on contrarian effect are also studied, and it's found that the selected stock portfolio performs better than CSI 300 index and its constituent stock. The empirical analysis proves that the semiparametric model can serve as a comparatively better predicting model, and our results can provide some theoretical references for managing risk and improving return.

Cite this article

ZHANG Li, DENG Li-ying, ZHOU Yong . Contrarian Effect of Semi-Parametric Alpha Strategy[J]. Chinese Journal of Management Science, 2016 , 24(12) : 30 -38 . DOI: 10.16381/j.cnki.issn1003-207x.2016.12.004

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