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Factor momentum in the Chinese stock market

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  • Ma, Tian
  • Liao, Cunfei
  • Jiang, Fuwei

Abstract

Based on 10 commonly used factors, we construct a novel factor momentum strategy in the Chinese stock market, which earns an annualized return of 9.91 %, with a Sharpe ratio of 1.15. Factor momentum subsumes stock momentum, high-priced momentum, and industry momentum, digests its component factors and a variety of anomalies, and represents the momentum anomaly in China. Furthermore, mispricing correction helps explain factor momentum, which produces stronger returns during higher aggregate idiosyncratic volatility periods as well as among stocks with higher information asymmetry and short-sale constraints. Exposure to factor premiums and the manifestation of predictability determine factor momentum in China.

Suggested Citation

  • Ma, Tian & Liao, Cunfei & Jiang, Fuwei, 2024. "Factor momentum in the Chinese stock market," Journal of Empirical Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:empfin:v:75:y:2024:i:c:s0927539823001251
    DOI: 10.1016/j.jempfin.2023.101458
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    More about this item

    Keywords

    Factor momentum; Chinese stock market; Mispricing; Factor premium; Factor timing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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