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An Empirical Test of Momentum Effect on the Chinese Market during COVID period

In: Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023)

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  • Kaiwen Wu

    (South China Normal University, School of Economics & Management)

Abstract

Our research analyzes momentum effects in the Chinese stock market during the COVID period from 2020 to 2023. We studied over 5000 Chinese A-share stocks categorized into 306 industry sectors to identify momentum and reversal effects in both individual stocks and industries. Our primary research follows the traditional construction of winner-loser groups. Results indicate that individual stock portfolios exhibit profits only when the formation period is one week, with diminishing earnings as the formation and holding periods increase. Reversal effects are observed in most cases, with the winner group showing a stronger impact than the loser group. In contrast, industry portfolios show different patterns of changes between momentum and reversal. Specifically, industry portfolios display short-term momentum effects, generating profits within one month, followed by reversal effects over longer periods. However, the magnitude of gains and losses in industry portfolios is smaller compared to individual stocks.

Suggested Citation

  • Kaiwen Wu, 2023. "An Empirical Test of Momentum Effect on the Chinese Market during COVID period," Advances in Economics, Business and Management Research, in: Amalendu Bhunia & Rubi Binti Ahmad & Yifeng Zhu (ed.), Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023), pages 307-317, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-298-9_34
    DOI: 10.2991/978-94-6463-298-9_34
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