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Return extrapolation in China: momentum amplification during earnings announcement months

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  • Zhou, Xin
  • Wen, Yifeng
  • Ou, Jichu
  • Cao, Weihao

Abstract

This paper examines the conditional heterogeneity of market return predictability using monthly data from China’s A-share market from 2000 to 2025. Based on 166,434 actual earnings release records, April (annual and first-quarter reports), August (mid-year reports), and October (third-quarter reports) collectively account for 79.8% of all new earnings releases throughout the year, constituting China’s true earnings release months. We find that past 12-month market returns strongly and positively predict subsequent returns during earnings announcement months, whereas predictive power in non-earnings announcement months is close to zero. This “truncated” conditional heterogeneity is robust across all three subsample periods and has intensified in recent years. The “momentum amplification” observed during China’s earnings season contrasts with the “parameter compression” documented by Guo (2025) for the U.S. market, providing evidence consistent with market-structure-related differences in how earnings-season information and past returns are incorporated into prices.

Suggested Citation

  • Zhou, Xin & Wen, Yifeng & Ou, Jichu & Cao, Weihao, 2026. "Return extrapolation in China: momentum amplification during earnings announcement months," Finance Research Letters, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:finlet:v:106:y:2026:i:c:s1544612326008196
    DOI: 10.1016/j.frl.2026.110291
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