Roller Conduction Effect Confirmed: Sectoral uptrends spread sequentially across industries.
Capital Flow Pathway Identified: Funds first enter Shanghai Composite stocks before rotating into other indices.
STAR 50 Reversal Pattern: Capital rotated from GEM stocks to STAR 50 stocks.
Low Coupling in April 2022: Fast capital rotation but weak dominant trend.
Opinion
This study provides strong evidence that sectoral capital rotation exists in the Chinese stock market.
By understanding this pattern, investors can anticipate capital flow trends and position themselves in high-potential industries ahead of the rotation.
Additionally, the STAR 50 reversal suggests that growth stocks are attracting capital inflows based on short-term strategic positioning.
Core Sell Point
The Roller Conduction Effect drives sequential sectoral uptrends in the Chinese stock market, with digital consumption leading valuation upgrades.
Understanding capital rotation trends enables investors to strategically position themselves for higher returns.
"The Roller Conduction Effect: Evidence from A-Share Data" This study empirically analyzes the existence of the Roller Conduction Effect in the Chinese A-share market, focusing on digital consumption trends and valuation cycles in the post-pandemic economic recovery.
What is the Roller Conduction Effect?
The Roller Conduction Effect describes a sequential capital rotation phenomenon where:
Limited capital exists in the market.
One sector's rise triggers capital inflows into another, creating a cyclical uptrend.
Not all sectors rise simultaneously—there is a time lag in sectoral uptrends.
Psychological factors (e.g., hot money and retail investor sentiment) accelerate this cycle.
Example (From This Study)
During post-pandemic consumption recovery:
Digital consumption stocks rose first as leaders of the upgrade cycle.
Traditional consumer goods stocks followed as capital rotated into them.
1. Research Objectives
Examine capital rotation patterns across different consumption sectors and introduce a new classification framework for sensory-based consumption.
Analyze whether digital consumption acts as an upgrade driver and receives higher valuations, interpreting the Roller Conduction Effect through temporal and spatial transmission.
Identify distinct rotational patterns in stock market capital movements and provide insights for investment strategy formulation.
2. Research Methodology
Collected A-share stock data (Shanghai Composite Index, Shenzhen Component Index, GEM Index, STAR 50 Index) from January to April 2022.
Analyzed digital consumption as a consumption upgrade tool and assessed higher valuation targets.
Applied electrical circuit energy transfer models to compare relationships within economic systems.
Used the Coupling Coordination Degree Model (CCDM) to quantify correlations and interdependencies between systems.
3. Key Findings
Roller Conduction Effect Confirmed:
Data analysis confirmed the presence of the Roller Conduction Effect in the A-share market, where the rise of one industry sequentially drives capital inflows into others.
Capital Flow Patterns:
The effect is most pronounced in stock capital movements, where funds first flow into Shanghai Composite Index components before rotating into other indices.
Reversal in the STAR 50 Index:
The STAR 50 Index exhibited a clear reversal trend against the Shanghai Composite Index, suggesting that capital rotated from GEM stocks into STAR 50 stocks.
Low Coupling State:
As of April 2022, the coupling coordination degree between the STAR 50 Index and other indices was low, indicating:
The Roller Conduction Effect emerges during valuation recovery cycles.
Capital rotates quickly but without a strong leading trend.
Conclusion
This study empirically validates the existence of the Roller Conduction Effect in the Chinese A-share market, particularly in stock capital flows. It also highlights the reversal pattern in STAR 50 and its implications for investment strategy formulation.
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