Investment horizons,cash flow news,and the profitability of momentum and reversal strategies in the Chinese stock market |
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Institution: | 1. Shenzhen Audencia Business School, Shenzhen University, Shenzhen 518060, China;2. Audencia Business School, Nantes 44300, France;3. Department of Finance, Lee Kong Chian School of Business, Singapore Management University, Singapore;4. Department of Finance, Strome College of Business, Old Dominion University, Norfolk, VA 23529, USA;1. Department of Business Management, National United University, Miaoli, Taiwan;2. Department of Banking and Finance, National Chi Nan University, Puli, Taiwan |
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Abstract: | This study investigates the profitability of momentum and reversal strategies of different investment horizons in the Chinese stock market. The findings indicate that momentum strategies are profitable for investment horizons less than one week. For longer investment horizons, reversal strategies are profitable. This result is very different from the US market, where profitable momentum strategies yield to much longer investment horizons. We show that this is because investors in Chinese stock market generally overreact to the company cash flow news while investors in US market underreact to cash flow news. |
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Keywords: | Momentum Reversal Overreaction Stock market D01 C14 C50 G11 G32 |
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