Momentum or contrarian trading strategy: Which one works better in the Chinese stock market

Yu, Lin; Fung, Hung‐Gay; Leung, W.K.

doi:10.1016/j.iref.2019.03.006

Cited by 38 publications

(17 citation statements)

References 48 publications

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“…This means that the volatility of factor sensitivities

{Std}_{c} ((), β_{italicimt}^{b})

, in all the four sectors, grows in the same direction with market volatility. That observation affirms previous studies such as References 9,12,31,33 and 34 that investors tend to herd during highly volatile market conditions. This notwithstanding, the results in Table 6 show that the dispersion of the betas

{Std}_{c} ((), β_{italicimt}^{b})

, for all stocks in the materials and environmental solution sectors, is significantly higher than in the other sectors.…”

Section: Resultssupporting

confidence: 92%

“…Despite the benefits of the previous generation of sustainable techniques that emerged in the early 1980s to support industries (just in time, total quality management, process reengineering, time-based competition, etc. ), these alone have not been sufficient to safeguard concerns for the protection of the environment 9 hence need for alternative approaches. Further, as more and more industrial clusters emerge across China, another move to imbed sustainable environmental health practices is driving collaborative networks so that group of firms can optimise environmentally responsible behaviours through shared resources.…”

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confidence: 99%

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Endangering China's environmental health security goals through negative environmental investor behaviours

Zhou

Antwi

et al. 2020

Health Planning & Management

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“…This means that the volatility of factor sensitivities

{Std}_{c} ((), β_{italicimt}^{b})

{Std}_{c} ((), β_{italicimt}^{b})

, for all stocks in the materials and environmental solution sectors, is significantly higher than in the other sectors.…”

Section: Resultssupporting

confidence: 92%

mentioning

confidence: 99%

Endangering China's environmental health security goals through negative environmental investor behaviours

Zhou

Antwi

et al. 2020

Health Planning & Management

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show abstract

“…They find moment trading profits in almost all the regions except Asia where the effect was very weak. Yu, Fung, and Leung (2019) also find the same trend in three Chinesse stock markets namely Shenzhen Stock Exchange (SZSE), SZSE Growth Enterprise (GEM) and Shanghai Stock Exchange (SSE). Hameed and Ting (2000) report the short-term contrarian profits in the Malaysian equity market while Locke and Gupta (2009) find contrarian trading returns in the Indian equity market.…”

Section: Literature Reviewmentioning

confidence: 57%

Long-Term, Short-Term and Time-Varying Profitability of Reversals: The Role of Market State and Volatility

Ali¹,

Shahrin²,

Mohd³

2020

IJEBA

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Purpose: The purpose of this paper is to investigate the various patterns of contrarian trading strategy that can generate superior returns for retail investors in Pakistan Stock Exchange (PSX). Design/Methodology/Approach: To examine the long-term and short-term pattern of contrarian anomaly, the study adopts the buy-and-hold method and j-k overlapping portfolio formation procedure of Jegadeesh and Titman with slight modifications. Moreover, the study is also carried out to investigate the relation between the performance of contrarian portfolios and several market conditions to further test if the time-varying contrarian effects are context-dependent. Findings: The study findings suggest the existence of both long-term and short-term reversal effects that vary over time. Interestingly, the contrarian strategies yield higher returns during crisis periods, negative market state and higher market volatility. We show that short-term reversals, thus the payoffs to contrarian strategy, are predictable with market state which is found to be the primary predictor. The overall findings of this research lend partial support to the Adaptive Market Hypothesis (AMH) which claims that the changed stock market conditions are the main causes of time-varying behavior of market efficiency. Practical Implications: The existing literature reveals that the unchecked stock market intermediaries in PSX artificially manipulate the stock prices and earn abnormal returns at the expense of momentum or uninformed investors. The current research enables the policy makers and regulators to understand why emerging equity markets fail due to manipulations and how unsheltered investors can survive under the weak governing environment. Originality/Value: This study contributes to the existing literature on asset pricing by innovating various ways of excess returns based on contrarian trading strategy. In addition, our work contributes to the literature on the AMH by testing the impact of several stock market conditions on the time-varying profitability of contrarian strategy. There is a dearth of literature on the conditioning impact of various market states on the time-varying behavior of trading strategies in emerging markets.

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“…They concluded that downgrade announcements of firms in the market explain the credit risk and return anomaly and significantly impact the cross-section of returns. Yu et al (2019) used weekly returns of winner-minus-loser portfolios, in China, and found that weekly stock return reversals were significant. Umutlu (2015) and Zaremba and Konieczka (2016) showed a positive relationship between price risk and future stock returns.…”

Section: Review Of Literaturementioning

confidence: 99%

Impact of Credit Risk on Momentum and Contrarian Strategies: Evidence from South Asian Markets

Hunjra

Tayachi

Mehmood

et al. 2020

Risks

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We examine the profitability of the momentum and contrarian strategies in three South Asian markets, i.e., Bangladesh, India, and Pakistan. We also analyze, whether credit risk influences momentum and contrarian return for these markets from 2008 to 2014. We use default risk that relates to non-payments of debts by firms as a measure of credit risk. For that purpose, we use distance to default (DD) by Kealhofer, McQuown, and Vasicek (KMV) model as a proxy of credit risk. We calculate the credit risk and form the momentum and contrarian strategies of the firms based on high, medium, and low risk. We find that in all three markets, the momentum and contrarian returns are significant for medium and high credit risk portfolios and no momentum and contrarian returns for low credit risk portfolios.

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Momentum or contrarian trading strategy: Which one works better in the Chinese stock market

Cited by 38 publications

References 48 publications

Endangering China's environmental health security goals through negative environmental investor behaviours

Endangering China's environmental health security goals through negative environmental investor behaviours

Long-Term, Short-Term and Time-Varying Profitability of Reversals: The Role of Market State and Volatility

Impact of Credit Risk on Momentum and Contrarian Strategies: Evidence from South Asian Markets

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