An Anecdote of Investor Anxiety and Momentum in China

Table 5

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

Panel A: F = H = 1 day
ACCI	Highest	2	3	4	Lowest
1F alpha	0.0026	0.0028	0.0027	0.0035	0.0064
t-stat	8.9064	9.0696	8.1529	9.9282	15.6850
CH-3 alpha	0.0026	0.0029	0.0027	0.0035	0.0064
t-stat	8.8959	9.1000	8.1425	9.8894	15.6560
FF-3 alpha	0.0026	0.0029	0.0027	0.0035	0.0064
t-stat	8.8242	8.9779	8.0365	9.8559	15.4857
Panel B: F = H = 2 days
ACCI	Highest	2	3	4	Lowest
1F alpha	0.0013	0.0017	0.0010	0.0009	0.0036
t-stat	3.3869	4.3199	2.2945	2.0152	6.9145
CH-3 alpha	0.0013	0.0017	0.0010	0.0009	0.0036
t-stat	3.3529	4.2977	2.2881	1.9869	6.8961
FF-3 alpha	0.0013	0.0018	0.0009	0.0009	0.0036
t-stat	3.3662	4.2934	2.2162	1.9870	6.8305
Panel C: F = H = 3 days
ACCI	Highest	2	3	4	Lowest
1F alpha	0.0012	0.0018	0.0013	0.0002	0.0027
t-stat	2.7346	3.9028	2.6414	0.3550	4.5375
CH-3 alpha	0.0012	0.0018	0.0013	0.0002	0.0027
t-stat	2.6988	3.8771	2.6310	0.3066	4.5234
FF-3 alpha	0.0012	0.0018	0.0013	0.0002	0.0027
t-stat	2.7237	3.8698	2.5721	0.2961	4.4912
Panel D: F = H = 30 days
ACCI	Highest	2	3	4	Lowest
1F alpha	−0.0117	−0.0181	−0.0203	−0.0263	−0.0315
t-stat	−9.0809	−12.7652	−14.8693	−18.8563	−20.8082
CH-3 alpha	−0.0117	−0.0181	−0.0203	−0.0263	−0.0315
t-stat	−9.0709	−12.7911	−14.9030	−18.8758	−20.8273
FF-3 alpha	−0.0116	−0.0181	−0.0202	−0.0262	−0.0315
t-stat	−8.9878	−12.7257	−14.7757	−18.6526	−20.7468
Panel E: F = H = 180 days
ACCI	Highest	2	3	4	Lowest
1F alpha	−0.0199	−0.0251	−0.0290	−0.0471	−0.0667
t-stat	−6.7706	−7.8772	−9.9016	−15.5761	−19.7604
CH-3 alpha	−0.0201	−0.0251	−0.0289	−0.0470	−0.0667
t-stat	−6.7974	−7.8374	−9.8577	−15.5364	−19.6877
FF-3 alpha	−0.0193	−0.0246	−0.0286	−0.0464	−0.0663
t-stat	−6.6017	−7.7689	−9.7518	−15.3621	−19.5937

This table reports the risk-adjusted daily momentum profits (MP) and related t-statistics (t-stat) for A-share stocks. F and H represent the length of the formation and holding periods, respectively. On each day, the accumulative relative order imbalance (ACCI = neg% − pos%) of every stock is acquired in the formation period and the stocks are initially classified according to the ACCI. Then, for each group based on previous classifications, the stocks are sorted by their past price growth rates in the formation period in order to identify winner and loser stocks. Winner-minus-loser return spreads in the holding periods are then calculated. We first test the momentum profits in the very short run. The most natural choice is 1 day, and we also calculate the 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 comprise the one-fifth of stocks with the highest price growth rate, while loser stocks comprise the one-fifth of stocks with the lowest price growth rate. The dependent variables are the winner-minus-loser return spreads under different levels of ACCI. 1F alpha denotes the regression intercept of the capital asset pricing model, CH-3 alpha is the regression intercept of the Chinese three-factor asset pricing model, and FF-3 alpha is the regression intercept of the Fama–French three-factor asset pricing model. The alphas are the risk-adjusted momentum profits. The t-statistics are based on White [68] heteroskedasticity-consistent standard errors according to Liu et al. [38]. 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.