Momentum Factors in Chinese Equities: Construction and Market Regimes
Summary
This research review examines momentum in China’s A-share market as institutional ownership and analyst attention have grown. It compares traditional lookback returns with measures that account for price paths, remove limit-up days, use earnings announcement reactions, separate overnight from intraday returns, and isolate stock-specific momentum. It also tests how momentum varies across market states, index universes, and groups with different institutional preferences.
The reported evidence is mixed across measures: simple annual momentum is weak, while removing limit-up days improves the reported ranking and portfolio results. A composite of selected indicators shows stronger in-sample performance across several samples. Momentum is generally more pronounced among institution-favored stocks, and the study reports better factor performance in falling or sideways markets than in rising markets. The analysis uses historical A-share data through 2021 and offers empirical factor results rather than a live-trading evaluation; past performance and changing market structure limit how broadly those findings can be applied.
Key ideas
- Traditional annual returns alone show weak momentum in the tested A-share sample.
- Removing limit-up-day returns materially changes stock rankings and improves the reported momentum signal.
- Path-sensitive, earnings-related, overnight, and stock-specific measures capture dimensions missed by cumulative returns.
- Momentum tends to be stronger in institution-favored stocks and in falling or sideways market regimes.
- The composite factor combines selected signals and reports stronger historical results across several tested universes.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.