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Momentum and seasonality in Chinese stock markets

By Bin Li, Judy Qiu and Yanhui Wu

Abstract

In this paper, we follow Jegadeesh and Titman's (1993, Journal of Finance)\ud approach to examine 25 momentum/contrarian trading strategies using monthly stock\ud returns in China for the period from 1994 to 2007. Our results suggest that there is no\ud momentum profitability in any of the 25 strategies. In contrast, there is some evidence of\ud reversal effects where the past winners become losers and past losers become winners\ud afterward. The contrarian profit is statistically significant for the strategies using short\ud formation and holding periods, especially for the formation periods of 1 to 3 months and\ud the holding periods of 1 to 3 months. The contrarian strategies can generate about 12% per\ud annum on average. Moreover, we follow Heston and Sadka (2008, Journal of Financial\ud Economics) to investigate where there is any seasonal pattern in the cross-sectional\ud variation of average stock returns in our momentum/contrarian strategies. There is no\ud evidence of any seasonal pattern, and the results are robust to different formation and\ud holding periods. \u

Topics: 150201 Finance, 150205 Investment and Risk Management, Momentum, Market efficiency, Seasonality, Emerging market
Publisher: EuroJournals Publishing Inc 2010
Year: 2010
OAI identifier: oai:eprints.qut.edu.au:38422
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