Momentum, Reversals, and Investor Clientele

70 Pages Posted: 1 Oct 2020 Last revised: 24 Aug 2021

See all articles by Andy C.W. Chui

Andy C.W. Chui

Hong Kong Polytechnic University

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 17, 2020

Abstract

Different share classes on the same firms provide a natural experiment to explore how investor clienteles affect momentum and short-term reversals. Domestic retail investors have a greater presence in Chinese A shares, and foreign institutions are relatively more prevalent in B shares. These differences result from currency conversion restrictions and mandated investment quotas. We find that only B shares exhibit momentum and earnings drift, and only A shares exhibit monthly reversals. Institutional ownership strengthens momentum in B shares. These patterns arise in a model with informed investors who underreact to fundamental signals, and retail investors who trade on noise.

Keywords: Chinese stock market, stock market anomalies, momentum, reversals

JEL Classification: G02, G10, G12

Suggested Citation

Chui, Andy Chun Wai and Subrahmanyam, Avanidhar and Titman, Sheridan, Momentum, Reversals, and Investor Clientele (September 17, 2020). Available at SSRN: https://ssrn.com/abstract=3674871 or http://dx.doi.org/10.2139/ssrn.3674871

Andy Chun Wai Chui

Hong Kong Polytechnic University ( email )

M808, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
(852)2766 7105 (Phone)
(852)2356 9550 (Fax)

Avanidhar Subrahmanyam (Contact Author)

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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