Methods of Financial Engineering: Strategy on Locking Periods

Abstract

From the perspective of financial engineering, this article conducts empirical tests towards the impact of China's A Stocks’ Reform (unlocking the non-tradable stocks) using event study method and finds positive and negative abnormal returns under different conditions. Such reform has a great effect on individual stocks. However, it is difficult to predict bullish or bearish solely on ‘style’, such as industries, market capitalization, unlocking ratio and the size of the shareholders. A hedge portfolio based on shareholders and unlocking ratio does not bring significant abnormal returns.