The University of Southampton
University of Southampton Institutional Repository

Information uncertainty and momentum phenomenon amidst market swings: evidence from the Chinese class A share market

Information uncertainty and momentum phenomenon amidst market swings: evidence from the Chinese class A share market
Information uncertainty and momentum phenomenon amidst market swings: evidence from the Chinese class A share market

This paper empirically investigates how firm-level information uncertainty impacts momentum profits in the Chinese Class A share market. We employ seven different factors to gauge the degree of firm-level information uncertainty—firm size, firm age, analysts’ coverage, return volatility, dispersion in analysts’ earnings forecast, trading volume, and the quality/strength of corporate governance (free float ratio). We find evidence showing that information uncertainty has an amplifying effect over the momentum profits, and the amplifying effect is more pronounced over the time periods following DOWN market state over the sample period from January 1996 to December 2013. The robustness of the empirical evidence is warranted by a risk-adjustment test based on the FF3F model and Wang and Xu’s (Financ Anal J 60(6):65–77, 2004) FF3F model, a sub-period analysis, and a different definition of market states. The empirical findings can provide an important reference point for international and domestic investors when adjusting investment strategies and portfolio positions in relatively volatile financial markets such as the Chinese stock market.

Amplifying effect, Asset pricing, Chinese Class A share market, Information uncertainty, Momentum phenomenon
1387-2834
1-26
Wu, Yuan
5a20b9bf-752c-4fad-aca4-37ebc7bcc200
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Wu, Yuan
5a20b9bf-752c-4fad-aca4-37ebc7bcc200
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728

Wu, Yuan and Choudhry, Taufiq (2018) Information uncertainty and momentum phenomenon amidst market swings: evidence from the Chinese class A share market. Asia-Pacific Financial Markets, 1-26. (doi:10.1007/s10690-018-9241-x).

Record type: Article

Abstract

This paper empirically investigates how firm-level information uncertainty impacts momentum profits in the Chinese Class A share market. We employ seven different factors to gauge the degree of firm-level information uncertainty—firm size, firm age, analysts’ coverage, return volatility, dispersion in analysts’ earnings forecast, trading volume, and the quality/strength of corporate governance (free float ratio). We find evidence showing that information uncertainty has an amplifying effect over the momentum profits, and the amplifying effect is more pronounced over the time periods following DOWN market state over the sample period from January 1996 to December 2013. The robustness of the empirical evidence is warranted by a risk-adjustment test based on the FF3F model and Wang and Xu’s (Financ Anal J 60(6):65–77, 2004) FF3F model, a sub-period analysis, and a different definition of market states. The empirical findings can provide an important reference point for international and domestic investors when adjusting investment strategies and portfolio positions in relatively volatile financial markets such as the Chinese stock market.

Text
Wu-Choudhry2018_Article_InformationUncertaintyAndMomen - Version of Record
Restricted to Repository staff only
Request a copy

More information

Accepted/In Press date: 14 June 2018
e-pub ahead of print date: 14 June 2018
Published date: June 2018
Keywords: Amplifying effect, Asset pricing, Chinese Class A share market, Information uncertainty, Momentum phenomenon

Identifiers

Local EPrints ID: 421799
URI: http://eprints.soton.ac.uk/id/eprint/421799
ISSN: 1387-2834
PURE UUID: 874dacb2-afa9-42ec-a183-45a6b569ae01
ORCID for Taufiq Choudhry: ORCID iD orcid.org/0000-0002-0463-0662

Catalogue record

Date deposited: 28 Jun 2018 16:30
Last modified: 18 Feb 2021 16:55

Export record

Altmetrics

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×