What is it about?
The purpose of this study is to investigate the presence of return reversal effect in the Shanghai A stock market. We use the late-stage contrarian strategy of Malin and Bornholt (2013) for the period March 2011‒March 2016.
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Why is it important?
We report findings of a significant short-term momentum effect in the Shanghai A stock market. A new reversal factor introduced into the Fama‒French three-factor model show that portfolios have a smaller size and have lower book-to-market ratios; the return reversal factor explains a portion of the abnormal returns and coefficient of the reversal effect is significant.
Perspectives
Chinese stock markets have distinctive features in comparison to the developed stock markets in terms of government control, institutional structure, liquidity, cultural background, etc. Such differences affect the pattern in stock returns compared with those observed in developed stock markets.
Dr Krishna Reddy
Toi Ohomai Institute of Technology
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This page is a summary of: Return reversal effect in Shanghai A share market, Managerial Finance, June 2019, Emerald,
DOI: 10.1108/mf-04-2018-0140.
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