Working Paper: NBER ID: w31839
Authors: Zhenyu Gao; Wenxi Jiang; Wei A. Xiong; Wei Xiong
Abstract: Despite the dominance of retail investors in the Chinese stock market, there’s a conspicuous absence of price momentum in weekly and monthly returns. This study uncovers the presence of price momentum in daily returns and, through a systematic analysis of trading heterogeneity among investors, links daily momentum to the attention and trading activities of new investors—a phenomenon particularly significant in emerging stock markets. Furthermore, our findings indicate the existence of daily price momentum in various other emerging markets, contrasting with its relative scarcity in developed ones.
Keywords: daily momentum; new investors; emerging markets; behavioral finance
JEL Codes: G02; G4; G40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| new investors' net buying (G24) | daily price momentum (C69) |
| daily price momentum (C69) | new investors' net buying (G24) |
| large investors' net buying (G24) | daily price momentum (C69) |
| daily price momentum (C69) | large investors' net buying (G24) |
| new investors' trading activity (G24) | observed momentum (C69) |
| experienced retail investors' trading activity (G41) | observed momentum (C69) |