دانلود رایگان مقاله بازده نیروی فزاینده، حالت های بازار و پویایی بازار

Abstract

Recent studies suggest that momentum returns are conditioned by market states, but we find that China is different. First, we find that momentum returns in China exclusively follow DOWN markets contrary to the U.S. evidence. Second, the absence of momentum returns following UP markets in China cannot be explained by market dynamics, unlike in the U.S. Third, momentum returns in China are higher when the market continues in the same state than when it transitions to the other state as in the U.S. but this is true in China only following DOWN states.

VII. Conclusion

Recent studies suggest that momentum returns are conditioned by market states with Cooper et al. (2004) reporting that momentum returns in the U.S. exclusively follow UP markets. The absence of momentum returns in the U.S. following DOWN markets is explained by Asem and Tian (2010) as the result of market dynamics wherein momentum returns experienced when the market continues in the DOWN state are offset by momentum losses when the market reverses to the UP state.

Though we find that momentum returns in China are also conditioned by market states, our results suggest that China is different. First, we find that momentum returns in China exclusively follow DOWN markets unlike in the U.S. Our results can explain why momentum returns in China have been historically low as it has experienced more UP than DOWN market states. Second, we find that the absence of momentum returns following UP markets in China cannot be explained by market dynamics, unlike the way it does in explaining the absence of momentum returns following DOWN markets in the U.S. Instead, we suggest that the absence of momentum returns following UP markets in China could be due to the risk-seeking behaviour of Chinese individual investors who find lottery-like past loser stocks equally attractive as past winner stocks following UP markets. In such an environment, both past winner and loser stocks post similar returns, negating the profitability of the momentum trading strategy. Third, though we find consistent with the U.S. and the non-U.S. evidence that the momentum returns in China are higher when the market continues in the same state than when it transitions to the other state, this is true in China only following DOWN states.

We contribute to the literature in the following ways. First, we document evidence that momentum returns can exclusively follow DOWN (not just UP) markets. Second, we confirm the importance of market states in conditioning momentum returns in the world’s largest emerging market. Third, we offer an alternative explanation for the historically low momentum returns in China based on market states instead of the low level of individualism as suggested by Chui et al. (2010).