Testing a Limit-Up Buying Strategy in China’s Growth Enterprise Market

Summary

The document describes a simple momentum test on constituents of China’s Growth Enterprise Market index. It buys a stock at the next day’s open after a limit-up day, with parameters that can be changed to study different indices and holding periods. The sample covers 250 trading days ending June 30, 2017, and records 1,120 limit-up events.

The reported average return across the tested events is negative 0.08%. Forty-two percent of trades were profitable, averaging 4.69%, while the remaining 58% lost an average of 3.65%. The author observes that winning events were less frequent but had larger average gains than losses. These results are specific to the sample and omit ST stocks and transaction costs. The document also suggests that the strategy’s outcomes may reflect market sentiment and trend conditions, but it provides no separate test establishing that relationship or demonstrating reliable excess returns.

Key ideas

• The test buys at the next open after a stock closes at the daily limit-up.
• The sample covers 250 trading days through June 30, 2017, and includes 1,120 events.
• The reported average return is negative, despite larger average gains on winners than average losses on losers.
• The study excludes ST stocks and transaction costs.
• Results may vary with market conditions and the chosen index or holding period.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.