An Anecdote of Investor Anxiety and Momentum in China

Table 3

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

Panel A: F = H = 1 day
ACCI	Highest	2	3	4	Lowest
MP	0.0026	0.0029	0.0028	0.0037	0.0066
t-stat	9.3112	9.4786	8.5720	10.6619	16.6676
MP (H-L)				−0.004
t-stat				−9.8863
F-stat (SFE)				23.3471
value				0.0000
Panel B: F = H = 2 days
ACCI	Highest	2	3	4	Lowest
MP	0.0013	0.0017	0.0010	0.0010	0.0037
t-stat	3.4724	4.4059	2.4176	2.3579	7.3361
MP (H-L)				−0.0024
t-stat				−4.662
F-stat (SFE)				7.0371
value				0.0000
Panel C: F = H = 3 days
ACCI	Highest	2	3	4	Lowest
MP	0.0012	0.0017	0.0013	0.0003	0.0028
t-stat	2.7862	3.8181	2.7958	0.5068	4.8114
MP (H-L)				−0.0016
t-stat				−2.6848
F-stat (SFE)				3.6393
value				0.0057
Panel D: F = H = 30 days
ACCI	Highest	2	3	4	Lowest
MP	−0.0107	−0.0169	−0.0193	−0.0248	−0.0304
t-stat	−8.3662	−12.1924	−14.5438	−18.2731	−20.4242
MP (H-L)				0.0197
t-stat				12.2662
F-stat (SFE)				29.5456
value				0.0000
Panel E: F = H = 180 days
ACCI	Highest	2	3	4	Lowest
MP	−0.0222	−0.0281	−0.0310	−0.0484	−0.0682
t-stat	−7.6851	−8.9120	−10.6797	−16.4591	−20.7767
MP (H-L)				0.046
t-stat				13.1039
F-stat (SFE)				38.5732
value				0.0000

This table presents the daily momentum profits (MP) and related t-statistics (t-stat) for A-share stocks. F and H represent the length of formation and holding periods, respectively. For each day, the accumulative relative order imbalance (ACCI = neg% − pos%) for every stock is acquired for the formation period and we initially classify the stocks based on ACCI. Then, for each group based on previous classifications, the stocks are sorted according to the past price growth rate in the formation period to identify the winner and loser stocks. Momentum profits (based on the average winner-minus-loser return spread) are thus calculated for the holding period. We also calculate the momentum profit (average winner-minus-loser return spread) of the highest-minus-lowest ACCI (H-L) group. According to Montgomery [65], our analyses for the effects of ACCI 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 for 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 on ACCI are categorized into 5 groups. Winner stocks are those for the one-fifth of stocks with the highest price growth rate, while loser stocks are those for 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.