Momentum Strategies: Are They Effective in China?

Abstract

This paper studies the effectiveness of the past return and the 52-week high momentum strategies for the recently established Chinese stock markets. We find that both strategies do not work in the aggregate across all class A and class B shares traded on the Shanghai and Shenzhen exchanges between 1991 and 2004. Our findings for the Chinese stock market are supportive of other research focusing on emerging stock markets in the Pacific Basin region. While we offer some conjectures for the failure of both momentum strategies in China, we do not have a precise explanation for our results. Further research needs to be carried out to investigate the ineffectiveness of momentum strategies in emerging markets.