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Does market openness mitigate the impact of culture? An examination of international momentum profits and post-earnings-announcement drift

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  • Guo, Jiaqi
  • Holmes, Phil

Abstract

We hypothesise cognitive dissonance arising from the interaction of individualism and sentiment drives cross-country variations in momentum returns and post-earnings-announcement-drift (PEAD) and that market openness mitigates the impact of culture. Empirical analysis of a sample of over 40 stock markets across the globe, supports the hypotheses. Results suggest returns to momentum and PEAD are driven by cognitive dissonance resulting from differences in culture, but the effects of individualism are reduced in more open markets. Mitigating effects are stronger for capital market integration and capital market openness measures than for financial openness. Results from robustness tests support our main findings.

Suggested Citation

  • Guo, Jiaqi & Holmes, Phil, 2022. "Does market openness mitigate the impact of culture? An examination of international momentum profits and post-earnings-announcement drift," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:intfin:v:76:y:2022:i:c:s1042443121001712
    DOI: 10.1016/j.intfin.2021.101464
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    More about this item

    Keywords

    Individualism; Sentiment; Culture; Openness; Momentum; Post-earnings-announcement drift;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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