An Empirical Analysis of Industry Momentum in Chinese Stock Markets

Dongwei Su ()

Emerging Markets Finance and Trade, 2011, vol. 47, issue 4, 4-27

Abstract: This paper documents significant abnormal profits for industry momentum strategies in Chinese stock markets. Industry momentum remains profitable even after controlling for lead-lag effect, the January effect, and individual stock momentum. Moreover, momentum profits generated by industry-specific components are much larger than those generated by common-factor components of the Fama-French three-factor model and a delayed-reaction three-factor model. The findings provide new evidence that momentum profits are due to idiosyncratic risk and investors' underreaction to industry-specific information. The implication is that behavioral biases, market manipulation, and institutional trading are pivotal in explaining why stock prices do not incorporate industry-specific news instantaneously.

Keywords: asset pricing; behavioral biases; Chinese stock markets; industry returns; momentum (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (9)

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