Momentum Factors in Chinese Equities: Construction and Performance
Summary
This study examines the shift from reversal toward momentum in Chinese A-shares, especially among stocks favored by institutions. It compares several ways to measure price strength: conventional lookback returns, returns excluding limit-up days, daily-rank and price-path measures, earnings-announcement reactions, overnight returns, and style-adjusted idiosyncratic momentum. The analysis also tests how results vary across market-cap universes, institutional-preference groups, and rising, falling, or range-bound market conditions.
The reported evidence favors combining signals over relying on simple trailing returns. Removing limit-up days improves the conventional measure, while path-aware and earnings-related indicators add useful information; some alternatives, including price smoothness and ordinary distance from the 52-week high, perform weakly or show reversal. An equal-weight composite of selected measures has stronger reported rank information and portfolio results across the tested universes. These are historical backtests on Chinese equities through 2021, with outcomes dependent on sample definitions, market regimes, and the study’s signal choices; they do not establish future performance.
Key ideas
- Institution-favored A-shares show stronger momentum behavior than stocks with lower institutional preference.
- Removing limit-up days from trailing returns improves the reported momentum signal.
- Path-aware, earnings-related, and overnight measures capture information that simple cumulative returns can miss.
- Momentum results vary by universe and market state, with stronger performance reported in falling and range-bound conditions.
- An equal-weight composite of selected momentum measures outperforms the individual approaches in the study’s historical tests.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.