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The price momentum of stock in distribution

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  • Liu, Haijun
  • Wang, Longfei

Abstract

In this paper, a new momentum of stock in distribution is proposed and applied in real investment. Firstly, assuming that a stock behaves as a multi-particle system, its share-exchange distribution and cost distribution are introduced. Secondly, an estimation of the share-exchange distribution is given with daily transaction data by 3σ rule from the normal distribution. Meanwhile, an iterative method is given to estimate the cost distribution. Based on the cost distribution, a new momentum is proposed for stock system. Thirdly, an empirical test is given to compare the new momentum with others by contrarian strategy. The result shows that the new one outperforms others in many places. Furthermore, entropy of stock is introduced according to its cost distribution.

Suggested Citation

  • Liu, Haijun & Wang, Longfei, 2018. "The price momentum of stock in distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 492(C), pages 2336-2344.
    • Handle: RePEc:eee:phsmap:v:492:y:2018:i:c:p:2336-2344
    DOI: 10.1016/j.physa.2017.11.154
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    References listed on IDEAS

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