Profitability of Return and Volume-based Investment Strategies in China's Stock Market
National University of Singapore (NUS)
Pacific-Basin Finance Journal, Forthcoming
We examine the informational role of the interaction between past returns and past trading volume in the prediction of cross-sectional returns over intermediate horizons in China's stock market. Our results show that low-volume stocks outperform high-volume stocks, volume discounts are more pronounced for past winners than for past losers, low-volume stocks experience return continuations, and high-volume winners exhibit return reversals. Our results are robust to risk adjustments relative to the Fama and French's three-factor model, and to stock exchange as well as large stock sub-samples. Our findings are not entirely consistent with the literature, which are likely to result from the market characteristics, in particular, the short-sales prohibition and the dominance of individual investors in the market.
Keywords: China's stock market, Investment strategy, Asset pricing, Trading volume
JEL Classification: G11, G14, G15Accepted Paper Series
Date posted: July 27, 2004
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