The gap between you and your peers matters: The net peer momentum effect in China

Huaigang Long (), Rui Zhu (), Congcong Wang (), Zhongwei Yao () and Adam Zaremba ()

Modern Finance, 2025, vol. 3, issue 3, 40-53

Abstract: We propose a new return predictive signal: the net peer momentum (NPM), defined as the excess return on analyst-connected firms (CF) over the focal firm. Examining its pricing effect in the Chinese equity market reveals a robust cross-sectional relationship: stocks with high NPM significantly outperform those with low NPM. Accordingly, a long-short strategy based on NPM quintiles earns over 1% per month. While both CF and NPM offer incremental pricing power, NPM exhibits a stronger effect, as it incorporates both information about peer firms and the degree of investor underreaction to such information.

Keywords: Connected-firm momentum; Asset pricing; Chinese stock returns; analyst co-coverage (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bdy:modfin:v:3:y:2025:i:3:p:40-53:id:347

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