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Momentum Trading, Mean Reveral and Overration in Chinese Stock Market

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Author Info
Yangru Wu (Rutgers University)

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Abstract

This paper considers the relationship between traded volume and volatility. We employ short sales data to discriminate between transactions that close existing long positions and transactions that establish new short positions. We test for, and where appropriate, incorporate non-linearity and asymmetry into the modelling process. The evidence supports a non-linear, bi-directional relationship between volume and volatility. The results suggest (i) that the market displays greater volatility following a period of short selling and (ii) that asymmetric responses to positive and negative innovations to returns appear to be exacerbated by short selling.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 232004.

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Length: 23 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:hkm:wpaper:232004

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  3. Harrison Hong & Jeremy C. Stein, 1999. "A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets," Journal of Finance, American Finance Association, vol. 54(6), pages 2143-2184, December. [Downloadable!] (restricted)
  4. Ronald Balvers & Yangru Wu & Erik Gilliland, 2000. "Mean Reversion across National Stock Markets and Parametric Contrarian Investment Strategies," Journal of Finance, American Finance Association, vol. 55(2), pages 745-772, 04. [Downloadable!] (restricted)
  5. Jegadeesh, Narasimhan, 1990. " Evidence of Predictable Behavior of Security Returns," Journal of Finance, American Finance Association, vol. 45(3), pages 881-98, July. [Downloadable!] (restricted)
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  7. Chan, Louis K C & Jegadeesh, Narasimhan & Lakonishok, Josef, 1996. " Momentum Strategies," Journal of Finance, American Finance Association, vol. 51(5), pages 1681-1713, December. [Downloadable!] (restricted)
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  10. Balvers, Ronald J. & Wu, Yangru, 2006. "Momentum and mean reversion across national equity markets," Journal of Empirical Finance, Elsevier, vol. 13(1), pages 24-48, January. [Downloadable!] (restricted)
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  11. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December. [Downloadable!] (restricted)
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  13. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March. [Downloadable!] (restricted)
  14. Patro, Dilip K. & Wu, Yangru, 2004. "Predictability of short-horizon returns in international equity markets," Journal of Empirical Finance, Elsevier, vol. 11(4), pages 553-584, September. [Downloadable!] (restricted)
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This page was last updated on 2009-11-22.

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