Momentum returns and information uncertainty: Evidence from China

Muhammad Cheema and Gilbert Nartea

Pacific-Basin Finance Journal, 2014, vol. 30, issue C, 173-188

Abstract: A recent theory of information uncertainty (IU) postulates a negative (positive) relationship between IU and future returns (momentum returns). We extend this theory by showing that its predictions could be conditioned by differences in behavioral biases induced by culture. We find that greater IU does not necessarily result in lower future returns in China unlike in the U.S. In fact for some IU proxies, high IU firms have higher future returns. Second, we confirm earlier evidence of a weak momentum effect in the Chinese stock market which is consistent with the low level of individualism among Chinese investors reported in the literature. Third we find that momentum returns of firms with greater IU are not necessarily higher than firms with lower IU.

Keywords: Momentum returns; Information uncertainty; Cultural differences; Behavioral biases; China (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:30:y:2014:i:c:p:173-188

DOI: 10.1016/j.pacfin.2014.10.002

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