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Last hour momentum in the Chinese stock market

Last hour momentum in the Chinese stock market To capture the last hour momentum over the intraday session, the authors develop a trading strategy for the exchange-traded fund (ETF) that is effective because of the T+0 trading rule. This strategy generates annualized excess return of 9.673%.Design/methodology/approachIn this study, the authors identify a last hour momentum pattern in which the sixth (seventh) half-hour return predicts the next half-hour return by employing high frequency 2012–2017 data from the China Securities Index (CSI) 300 and its ETF.FindingsOverall, both the predictability and the trading strategy are statistically and economically significant. In addition, the strategy performs more strongly on high volatility days, high trading volume days, high order-imbalance days and days without economic news releases than on other days.Originality/valueNoise trading, late-information trading, infrequent rebalancing and disposition effects from retail investors may account for this phenomenon. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Finance Review International Emerald Publishing

Last hour momentum in the Chinese stock market

China Finance Review International , Volume 12 (1): 32 – Feb 1, 2022

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2044-1398
DOI
10.1108/cfri-06-2021-0106
Publisher site
See Article on Publisher Site

Abstract

To capture the last hour momentum over the intraday session, the authors develop a trading strategy for the exchange-traded fund (ETF) that is effective because of the T+0 trading rule. This strategy generates annualized excess return of 9.673%.Design/methodology/approachIn this study, the authors identify a last hour momentum pattern in which the sixth (seventh) half-hour return predicts the next half-hour return by employing high frequency 2012–2017 data from the China Securities Index (CSI) 300 and its ETF.FindingsOverall, both the predictability and the trading strategy are statistically and economically significant. In addition, the strategy performs more strongly on high volatility days, high trading volume days, high order-imbalance days and days without economic news releases than on other days.Originality/valueNoise trading, late-information trading, infrequent rebalancing and disposition effects from retail investors may account for this phenomenon.

Journal

China Finance Review InternationalEmerald Publishing

Published: Feb 1, 2022

Keywords: Last hour momentum; Intraday prediction; Chinese stock market; Exchange-traded fund; Information trading; G11; G14; G17

References