Abstract:
This paper investigates short term to intermediate-horizon momentum effect in
Chinese capital market. The result of the research supports the assertion that momentum
effect exists in Chinese capital market. Using momentum strategies could create return
in excess of market average return. This paper also examines influence of firm size and
average trading volume on the effectiveness of momentum strategies. We found that firm
size has a negative relationship with momentum return and that relationship is
statistically significant. On the other hand, our results confirm a negative relationship
between trading volume and momentum return and that relationship is not as significant
as firm size effect. The regression analysis also conclude that historical returns
contribute the most to momentum return, indicating that momentum effect is not
subsumed by size and liquidity effect.