The Predictable Behavior of Security Returns: A Comparative Study Between US and China Markets

Abstract

Jegadeesh (1990) examines the serial correlation in monthly stock returns and tests its economic significance by designing three trading strategies. In this study, we follow his research design to compare the security return predictability between US market and China market. The findings suggest that the significant strong predictability Jegadeesh (1990) finds over the period from 1934 to 1987 in US market is much weaker during recent years from 2001 to 2015. Furthermore, the comparison shows that the security return predictability in China market is even stronger than that in US market in recent period.

Keywords: return predictability; China market; momentum

JEL Classification: G11; G12; G14