A new momentum measurement in the Chinese stock market

Li, Yan; Liang, Chao; Huynh, Toan Luu Duc

doi:10.1016/j.pacfin.2022.101759

Cited by 15 publications

(4 citation statements)

References 43 publications

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“…While the momentum effect is well documented in mature capital markets, it is mixed in emerging markets. As the world's largest emerging market, the evidence of momentum effect in China is also mixed (Yang et al, 2019;Li et al, 2022). Meanwhile, prior studies mainly examined individual stock momentum in China, with little concern for industry momentum.…”

Section: Industry Momentum and Trading Volume 1139mentioning

confidence: 99%

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Industry momentum and trading volume: evidence from China

Wang,

2024

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PurposeAs the world's largest emerging market, the evidence of momentum effect in China is also mixed. Meanwhile, prior studies mainly examined individual stock momentum in China, with little concern for industry momentum and its relationship with trading volume. The motivation of this study is to investigate industry momentum in China and examine whether trading volume can enhance its profitability.Design/methodology/approachFirstly, the authors test the existence of industry momentum in China; secondly, the authors test the correlation between trading volume and momentum returns using the double ranking method; finally, the authors test whether trading volume enhances the momentum returns using Fama–French five-factor model.FindingsThe authors find that there is a significant industry momentum effect in China, and the momentum returns jointly come from winner and loser portfolios. The intervals between the formation and holding periods have an impact on the performance of momentum portfolios. In terms of trading volume, the authors find that high-volume industries have industry momentum effects while low-volume industries do not. The industry momentum strategies achieve higher excess returns in high-volume industries.Practical implicationsPrior literature found higher momentum returns in low-volume stocks in China, but the research in this study suggests that implementing an industry momentum strategy in low-volume industries will miss out on higher returns or even bring losses, and instead the investors should invest in high-volume industries to get the best performance.Originality/valueThis study extends existing research by focusing on industry momentum and its relationship with trading volume in the Chinese stock market and finds an interesting relationship between industry momentum returns and trading volume, which is different from related studies.

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Section: Industry Momentum and Trading Volume 1139mentioning

confidence: 99%

“…As the world's largest emerging market, the evidence of momentum effect in China is also mixed (Yang et al. , 2019; Li et al. , 2022).…”

Section: Introductionmentioning

confidence: 99%

Industry momentum and trading volume: evidence from China

Wang,

2024

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“…According to research, momentum trading is advantageous and beats the mar-ket [49,50]. Enhanced momentum strategies decrease crashes and improve risk-adjusted returns [51,52]. Removing stocks with extreme absolute strength from momentum portfolios reduces volatility and enhances returns [53].…”

Section: Investing Strategiesmentioning

confidence: 99%

Mastery of “Monthly Effects”: Big Data Insights into Contrarian Strategies for DJI 30 and NDX 100 Stocks over a Two-Decade Period

Chiu,

Huang,

Day

et al. 2024

Mathematics

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In contrast to finding better monthly performance shown in a specific month, such as the January effect (i.e., better stock price performance in January as opposed to other months), which has been extensively studied, the goal of this study is to determine whether investors would obtain better subsequent performance as technical trading signals emitted in a specific month because, from the investment perspective, investors purchasing stocks now would not know their performance until later. We contend that our analysis emphasizes its critical role in steering investment decisions and enhancing profitability; nonetheless, this issue appears to be overlooked in the relevant literature. As such, utilizing big data to analyze the constituent stocks of the DJI 30 and NDX 100 indices from 2003 to 2022 (i.e., two-decade data), this study investigates whether trading these stocks as trading signals emitted via contrarian regulation of stochastic oscillator indicators (SOIs) and the relative strength index (RSI) in specific months would result in superior subsequent performance (hereafter referred to as “monthly effects”). This study discovers that the oversold signals generated by these two contrarian regulations in March were associated with higher subsequent performance for holding 100 to 250 trading days (roughly one year) than other months. These findings highlight the importance of the trading time and the superiority of the RSI over SOIs in generating profits. This study sheds light on the significance of oversold trading signals and suggests that the “monthly effect” is crucial for achieving higher returns.

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“…Therefore, our research aims to cover the gaps in research during this time by conducting a momentum test with data from January 2020 to March 2023. [9] 3…”

Section: Literature Reviewmentioning

confidence: 99%

An Empirical Test of Momentum Effect on the Chinese Market during COVID period

2023

Advances in Economics, Business and Management Research

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Our research analyzes momentum effects in the Chinese stock market during the COVID period from 2020 to 2023. We studied over 5000 Chinese Ashare stocks categorized into 306 industry sectors to identify momentum and reversal effects in both individual stocks and industries. Our primary research follows the traditional construction of winner-loser groups. Results indicate that individual stock portfolios exhibit profits only when the formation period is one week, with diminishing earnings as the formation and holding periods increase. Reversal effects are observed in most cases, with the winner group showing a stronger impact than the loser group. In contrast, industry portfolios show different patterns of changes between momentum and reversal. Specifically, industry portfolios display short-term momentum effects, generating profits within one month, followed by reversal effects over longer periods. However, the magnitude of gains and losses in industry portfolios is smaller compared to individual stocks.

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A new momentum measurement in the Chinese stock market

Cited by 15 publications

References 43 publications

Industry momentum and trading volume: evidence from China

Industry momentum and trading volume: evidence from China

Mastery of “Monthly Effects”: Big Data Insights into Contrarian Strategies for DJI 30 and NDX 100 Stocks over a Two-Decade Period

An Empirical Test of Momentum Effect on the Chinese Market during COVID period

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