Horse race of weekly idiosyncratic momentum strategies with respect to various risk metrics: Evidence from the Chinese stock market

Huai-Long Shi and Wei-Xing Zhou

The North American Journal of Economics and Finance, 2021, vol. 58, issue C

Abstract: This paper focuses on the horse race of weekly idiosyncratic momentum (IMOM) with respect to various idiosyncratic risk metrics. Using the A-share individual stocks in the Chinese market from January 1997 to December 2017, we first evaluate the performance of the weekly momentum based on raw returns and idiosyncratic returns, respectively. After that the univariate portfolio analysis is conducted to investigate the return predictability with respect to various idiosyncratic risk metrics. Further, we perform a comparative study on the performance of the IMOM portfolios with respect to various risk metrics. At last, we explore the possible explanations to IMOM as well as risk-based IMOM portfolios. We find that 1) there are prevailing contrarian effect and IMOM effect for the whole sample; 2) the negative relations exist between most of the idiosyncratic risk metrics and the cross-sectional stock returns, and better performance is linked to idiosyncratic volatility (IVol) and maximum drawdowns (IMDs); 3) additionally, the IVol-based and IMD-based IMOM portfolios exhibit better explanatory power to the IMOM portfolios with respect to other risk metrics; 4) finally, higher profitability of IMOM as well as IVol-based and IMD-based IMOM portfolios is found to be related to upside market states, high levels of liquidity and high levels of investor sentiment.

Keywords: Momentum effect; Contrarian effect; Idiosyncratic risk; Chinese stock market (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Horse race of weekly idiosyncratic momentum strategies with respect to various risk metrics: Evidence from the Chinese stock market (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:58:y:2021:i:c:s106294082100098x

DOI: 10.1016/j.najef.2021.101478

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