An Anecdote of Investor Anxiety and Momentum in China

Table 2

The effect of the daily relative order imbalance of the A-share market.

Panel A: F = H = 1 day
ROI	Highest	2	3	4	Lowest
MP	0.0093	0.0033	0.0015	0.0020	0.0041
t-stat	24.2763	10.7031	5.3008	7.3498	13.9771
MP (H-L)				0.0052
t-stat				11.1713
F-stat (SFE)				99.0568
value				0.0000
Panel B: F = H = 2 days
ROI	Highest	2	3	4	Lowest
MP	0.0064	0.0015	0.0009	0.0002	0.0022
t-stat	13.0337	3.8611	2.4428	0.4907	5.8371
MP (H-L)				0.0042
t-stat				8.0401
F-stat (SFE)				36.3640
value				0.0000
Panel C: F = H = 3 days
ROI	Highest	2	3	4	Lowest
MP	0.0051	0.0015	0.0009	0.0001	0.0018
t-stat	8.9987	3.1393	2.0881	0.2383	4.1545
MP (H-L)				0.0033
t-stat				5.862
F-stat (SFE)				17.8774
value				0.0000
Panel D: F = H = 30 days
ROI	Highest	2	3	4	Lowest
MP	−0.0283	−0.0248	−0.0227	−0.0213	−0.0179
t-stat	−19.6921	−18.2659	−17.4103	−16.3441	−13.4833
MP (H-L)				−0.0104
t-stat				−6.2509
F-stat (SFE)				6.0864
value				0.0001
Panel E: F = H = 180 days
ROI	Highest	2	3	4	Lowest
MP	−0.0529	−0.0485	−0.0438	−0.0413	−0.0307
t-stat	−17.4868	−16.5624	−14.8212	−14.2393	−10.7622
MP (H-L)				−0.0222
t-stat				−6.9754
F-stat (SFE)				8.8145
value				0.0000

This table presents the daily momentum profits (MP) and related t-statistics (t-stat) of A-share stocks. F and H represent the length of the formation and holding periods, respectively. For each day, we calculate the daily relative order imbalance (ROI) of every stock and sort the stocks according to the daily relative order imbalance for that day. Within each group based on previous sorts, we select winner and loser stocks based on the past price growth rate in the formation period and then calculate the momentum profit (average winner-minus-loser return spread) for the holding period. In addition, we also calculate the momentum profit (average winner-minus-loser return spread) of the highest-minus-lowest ROI (H-L) group. According to Montgomery [65], our analyses for the effects of ROI on momentum profits are single-factor experiments (SFE), so we calculate F-statistics to test if the winner-minus-loser return spreads from different groups have the same average values. We first test the momentum profits in the very short run. The most natural choice is 1 day, and we also calculate momentum profits for 2 days and 3 days for robustness. In addition, we further test the momentum profits for 30 days and 180 days to see how they behave in the relatively long run. The sorts conducted for the daily relative order imbalance (ROI) are divided into 5 groups. Winner stocks are the one-fifth of stocks with the highest price growth rate, while loser stocks are the one-fifth of stocks with the lowest price growth rate. The formation and holding periods have the same length according to Verardo [66], Avramov et al. [67], and Hillert et al. [31]. The critical value of 5% significance of t-statistic is 1.96.