Abstract
We show that significant momentum exists in China equity returns outside the month of February for both the past return and the 52-week high momentum ranking criteria. For 6-month holding periods, the magnitudes range from 73 bp to 110 bp per month in both raw and factor-adjusted returns using the China factors of Liu et al. (2019). A strong seasonal February reversal masks momentum when all months are considered together. The reversal is associated with a spike in turnover for recent loser stocks, which we attribute to an appetite for lottery-like stocks by retail investors in the season of the Chinese New Year. We show that the turnover difference between winner and loser stocks is a significant determinant of momentum in all three culturally Chinese equity markets—China, Taiwan, and Hong Kong. However, consistent with the dominance of retail investors in China, the February seasonal is weaker in Taiwan and non-existent in Hong Kong, and strong enough to mask momentum in other months only in China.
| Original language | English |
|---|---|
| Article number | 102173 |
| Journal | Pacific Basin Finance Journal |
| Volume | 82 |
| Number of pages | 12 |
| ISSN | 0927-538X |
| DOIs | |
| Publication status | Published - Dec 2023 |
Keywords
- 52-week high
- Chinese new year
- Contrarian trading
- February
- Momentum
- Turnover