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
1-26
Wu, Yuan
5a20b9bf-752c-4fad-aca4-37ebc7bcc200
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
June 2018
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, .
(doi:10.1007/s10690-018-9241-x).
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.
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Wu-Choudhry2018_Article_InformationUncertaintyAndMomen
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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
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Date deposited: 28 Jun 2018 16:30
Last modified: 16 Mar 2024 03:16
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Author:
Yuan Wu
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