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An Anatomy of Trading Strategies: Evidence from China

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Author Info

  • Haigang Zhou
  • John Geppert
  • Dongmin Kong
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    Abstract

    Using a pooled cross-sectional time series approach, we evaluate profits of momentum strategies and identify the sources of profits in China's stock market. Momentum strategies generate significant and negative returns in the A-share market on investment horizons at one month and at and above nine months. In the B-share market, momentum strategies yield significant and negative returns at and above twelve months. Decomposition analysis finds that the negative returns are predominately attributed to the time series profitability of stock returns. Although momentum strategies generate significant and positive returns over the period after China opened its once foreign-restricted B-share market to domestic individual investors, the relative importance of the time series predictability and the cross-sectional variation does not change.

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    Bibliographic Info

    Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

    Volume (Year): 46 (2010)
    Issue (Month): 2 (March)
    Pages: 66-79

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    Handle: RePEc:mes:emfitr:v:46:y:2010:i:2:p:66-79

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    Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

    Related research

    Keywords: autocorrelation; contrarian; cross section; momentum; time series;

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    Cited by:
    1. Zhian Chen & Hai Jiang & Donghui Li & Ah Boon Sim, 2010. "Regulation Change and Volatility Spillovers: Evidence from China's Stock Markets," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(6), pages 140-157, November.
    2. Yan-Ting Lin & Shang-Chi Gong & Sou-Shan Wu & Tsung-Pei Lee, 2012. "E/P Mean Reversion-Based Strategies for Investment Practice: Evidence from the Taiwan Market," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(1), pages 117-131, January.

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