Momentum Effect In The Chinese Stock Market

Momentum effect means the price persistence,which indicates stocks with good performance will continue their good performance in the future and those perform bad will still have poor performance in the future.Momentum effect has been considered to be a market anomaly and draw a lot of attention from the academia.In this paper,we give the evidence of short-term momentum and intraday momentum performance in the Chinese stock market,and find the main influencing factors for this phenomenon.By using the monthly data from A-shares stock market,we study the performance of short-term momentum in the Chinese stock market and find the reason for the inefficiency of short-term momentum effect.When the signs of market return are same during the construction and the holding periods of short-term momentum strategy,the momentum effect has good performance in the Chinese stock market.However,when the signs of market return are opposite during these two periods,the momentum effect changes to reversal effect.The number of these two subsamples is similar,so the whole short-term momentum effect is insignificant in the Chinese stock market because the offsetting of contrary influences.We consider the influence of market return sign into the strategy construction and find the improved momentum strategy has significantly positive excess return,which can last for two or three months.Excess return from the improved momentum strategy can't be explained by the Fama and French factors,and it may be a new factor for the Chinese stock market to explain the stock return.Based on these facts,we think the first thing before improving the information diffusion efficiency and modifying the short-term momentum is to stabilize the market development.Beneficial from the availability of high-frequency data,we study the intraday momentum pattern in this paper and extent the study to the firm level in the emerging market.We find the similar conclusion as the results from Gao et.al in the U.S.stock market: first half hour return after the market open is significantly positively related to the last half return before the market close.We extend the study of Gao et.al.and find the overnight return from the transactions of professional investors during the call auction plays a greater important role in the intraday momentum pattern.What's more,by using the data from one big security company,we also verify the late-informed trading hypothesis in the Gao et.al.We also give the time-series trend of the intraday momentum performance during time and some more detailed analysis in this paper.In the last part of this paper,we furtherly study the relationship between intraday momentum pattern and the information.When there is more information in the whole market,the information gap of professional investors and the late-informed investors increases and the intraday momentum strengthens.Influenced by the information character and investors different reactions,intraday momentum pattern weakens when the new positive information comes and strengthens when the new negative information comes.What's more,the positive information spreads faster than the negative one.What's more,the release of public news gives the homogeneous information for investors,decreases the information gap of two investors and weakens the intraday momentum pattern.Influence of public news is unrelated to the property of news itself.In summary,this paper extends the research of momentum effect in Chinese stock market: it gives an effectively improved short-term momentum strategy,finds the key factors of intraday momentum effect,and furtherly analyzes the influence of information on intraday momentum effect,providing evidence from the biggest emerging stock market for related research.