Mohammad Cheema
Ph.D. Student, Lincoln University, New Zealand.
Gilbert Nartea
Professor, Lincoln University, New Zealand.Momentum Returns and Market States
This paper investigates the presence of momentum returns in
Shanghai Stock Exchange China over the period of 1995 to 2010. The
mean monthly momentum profit is 0.96% and it remains significant
even after adjusting to Fama-French three factors. However,
momentum returns decreases to 0.72% following UP market state
whereas it increases to 1.96% following DOWN market state. We
conclude that market states cannot explain momentum returns entirely
but it is evident that momentum returns are two times higher following
DOWN market state as compared to UP market state.