Residual momentum and the cross-section of stock returns: Chinese evidence

Qi Lin

Finance Research Letters, 2019, vol. 29, issue C, 206-215

Abstract: In this paper, I find that sorting stocks into portfolios based on their residual, as opposed to raw past returns, generates significant profits in the Chinese equity market and cannot be subsumed by the well-established factor models. Moreover, the residual momentum profits do not reverse in the long run (up to three years), supporting the investor underreaction hypothesis. Further analysis reveals that residual momentum is priced in the cross-section of stock returns whereas the Carhart (1997) momentum factor is found to be redundant for describing average stock returns.

Keywords: Residual momentum; Conventional momentum; Asset pricing; Chinese market (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:29:y:2019:i:c:p:206-215

DOI: 10.1016/j.frl.2018.07.009

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