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Lookup NU author(s): Dr Chen SuORCiD
This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).
This study conducts a comprehensive investigation into style momentum strategies––the combination of price momentum strategies based on previous medium-term returns and style investing in terms of firm characteristics––in the China stock market over the period 1994 to 2017. Although we do not find style momentum profits over the first sub-period 1994 to 2006, strong evidence shows that style momentum strategies are profitable over the second sub-period 2007 to 2017, even after controlling for trading costs and various market and firm-specific risks. Importantly, the observed style momentum in the second sub-period is distinguished from price momentum and industry momentum but could be attributed to the improved institutional settings in recent years. Specifically, the fast growth of institutional investors since 2006, along with the introduction of margin trading and short sales in 2010, provides style switchers with more efficient investment vehicles to trade an entire style in the China stock market. Finally, we find that style profits exhibit momentum in a cyclical nature; in particular, style momentum profits are negatively related to market states, implying that it is likely for institutional investors to make profits by constructing style momentum strategies when stock market experiences a major decline.
Author(s): Su C
Publication type: Article
Publication status: Published
Journal: Financial Markets and Portfolio Management
Year: 2021
Volume: 35
Issue: 1
Pages: 101-144
Print publication date: 16/03/2021
Online publication date: 22/12/2020
Acceptance date: 30/10/2020
Date deposited: 23/12/2020
ISSN (print): 1555-4961
ISSN (electronic): 1555-497X
Publisher: Springer
URL: https://doi.org/10.1007/s11408-020-00375-z
DOI: 10.1007/s11408-020-00375-z
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