Investor heterogeneity and momentum-based trading strategies in China

Ya Gao, Xing Han, Youwei Li and Xiong Xiong

International Review of Financial Analysis, 2021, vol. 74, issue C

Abstract: The conventional momentum strategy performs poorly overall in China, because stock prices behave very differently when markets are open for trading versus when they are closed. Stocks that are past intraday (overnight) winners persistently outperform those that are past intraday (overnight) losers in the subsequent intraday (overnight) periods. However, the same intraday- (overnight-) momentum strategy suffers dramatically in the subsequent overnight (intraday) periods. Further analysis shows that past intraday (overnight) winners tend to be more (less) speculative stocks which are highly demanded during the day (night). Overall, our results are consistent with investor heterogeneity, and this persistent tug of war virtually eliminates the effectiveness of investors pursuing the momentum-based trading strategy in China.

Keywords: Investor heterogeneity; Intraday return; Overnight return; Momentum (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G17 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:74:y:2021:i:c:s1057521920302957

DOI: 10.1016/j.irfa.2020.101654

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