Empirical Analysis Return-based Investment Strategies

There are numerous investment strategies that analyze past market data in an attempt to predict trends in future stock returns. Evidence on the profitability of such strategy rejects the efficient market hypothesis (EMH) at its most basic level: Two recent approaches to investment that have challenged the weak form of the momentum wins EMH are:1) The contrarian strategy, 2) The momentum strategy Many studies provide evidence for the profitability of both these strategies. But in widespread literature have imply to effective factors that overshadow profitability this strategies. Hence for indication this variable one used method is to definition two-stage strategies and then to test those. Herein study has define two-stage strategies by Trading volume, Institutional Investor holding rate, free float stock and base volume and then compare those with one-stage strategies. The finding in this paper show that a strong moment effect, in short term, present in this market, this strategy can create abnormal return. Further analyses reveal that the profits generated by such investment strategies can not be explained by either the small firm effect or the institutional investors or free float effects.