The evolvement of momentum effects in China: evidence from functional data analysis
Li, B., Liu, Z., Teka, H. and Wang, S.
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1016/j.ribaf.2022.101833 Abstract/SummaryUnlike developed securities markets, momentum or reversal effect disputes in China’s A-shares markets. Using an approach based on functional data analysis, we address this controversy in an effort to reconcile earlier inconsistencies. It identifies nonlinear cross-sectional variation patterns as well as the dynamic time-series evolution of average stock returns. Our empirical findings give persuasive evidence that mid-term momentum effects disappeared and reversal effects dominated the market after the 2008 global financial crisis. We also find substantial reversal effects for the short- (1-6 months) and long-term (3 years), respectively, but no evidence of permanent momentum effects in China.
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