 Momentum, idiosyncratic volatility and market dynamics: Evidence from ChinaMuhammad Cheema and Gilbert Nartea Pacific-Basin Finance Journal, 2017, vol. 46, issue PA, 109-123 Abstract: Recent evidence on the relation between momentum and idiosyncratic volatility (IV) in the U.S. is mixed. We verify the relation between momentum and IV in China and find at best, no relation, supporting the view that idiosyncratic risk is not a significant arbitrage cost for momentum returns. While the absence of a positive relation between momentum returns and IV rejects both the underreaction and the overconfidence and self-attribution stories of momentum, we find support for the overconfidence and self-attribution story from our results on market dynamics and momentum. Our results are robust when verified in other Asian markets. We also find support for the suggestion that cross-country differences in momentum returns could be the result of differences in market dynamics rather than differences in levels of individualism as suggested earlier in the literature. Keywords: Momentum; Idiosyncratic volatility; Market dynamics; Arbitrage cost; Overconfidence (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:46:y:2017:i:pa:p:109-123 DOI: 10.1016/j.pacfin.2017.09.001 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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