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Intraday momentum and reversal in Chinese stock market

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  • Chu, Xiaojun
  • Gu, Zherong
  • Zhou, Haigang

Abstract

Taking intraday first-half-hour returns as predictor, we find significant intraday momentum and a reversal effect in the Chinese stock market. This momentum and reversal effect is robust even when including previous day returns, overnight returns, and day-of-week effect. We confirm that noise trading is the driving factor that causes the predictability of intraday returns. Although the investment strategy based on the first-half-hour returns can generate abnormal returns, the presence of costs prevents arbitrageur's intervention and makes the intraday returns predictability exist persistently.

Suggested Citation

  • Chu, Xiaojun & Gu, Zherong & Zhou, Haigang, 2019. "Intraday momentum and reversal in Chinese stock market," Finance Research Letters, Elsevier, vol. 30(C), pages 83-88.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:83-88
    DOI: 10.1016/j.frl.2019.04.002
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    Cited by:

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    2. Yafeng Qin & Guoyao Pan & Min Bai, 2020. "Improving market timing of time series momentum in the Chinese stock market," Applied Economics, Taylor & Francis Journals, vol. 52(43), pages 4711-4725, September.
    3. Lin, Hung-Wen & Huang, Jing-Bo & Lin, Kun-Ben & Zhang, Joyce & Chen, Shu-Heng, 2020. "Which is the better fourth factor in China? Reversal or turnover?," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    4. Xiaojun Chu & Jianying Qiu, 2021. "Forecasting stock returns using first half an hour order imbalance," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3236-3245, July.
    5. Mehdi Zolfaghari & Bahram Sahabi, 2021. "The impact of oil price and exchange rate on momentum strategy profits in stock market: evidence from oil-rich developing countries," Review of Managerial Science, Springer, vol. 15(7), pages 1981-2023, October.
    6. Yuan, Xianghui & Li, Xiang, 2022. "Delta-hedging demand and intraday momentum: Evidence from China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 600(C).
    7. Jongho Kang & Jangkoo Kang & Jaeram Lee, 2022. "Who and what drives informed options trading after the market opens?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(3), pages 338-364, March.
    8. Wen, Danyan & Wang, Yudong & Zhang, Yaojie, 2021. "Intraday return predictability in China’s crude oil futures market: New evidence from a unique trading mechanism," Economic Modelling, Elsevier, vol. 96(C), pages 209-219.
    9. Gang Chu & Xiao Li & Dehua Shen & Yongjie Zhang, 2021. "Stock Crashes and Jumps Reactions to Information Demand and Supply: An Intraday Analysis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 397-427, September.
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    12. Onishchenko, Olena & Zhao, Jing & Kuruppuarachchi, Duminda & Roberts, Helen, 2021. "Intraday time-series momentum and investor trading behavior," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).

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    More about this item

    Keywords

    Intraday returns predictability; Trading costs; Noise trading;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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