An Anecdote of Investor Anxiety and Momentum in China

Table 7

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

Panel A: F = H = 1 day
ACCI	Highest	2	Lowest
MP	0.0132	0.0124	0.0187
t-stat	0.9139	0.6781	0.9135
F-stat (SFE)		3.8613
value		0.0836
Panel B: F = H = 2 days
ACCI	Highest	2	Lowest
MP	0.0509	−0.0081	0.035
t-stat	2.0079	−0.2416	0.9545
F-stat (SFE)		2.8923
value		0.1320
Panel C: F = H = 3 days
ACCI	Highest	2	Lowest
MP	0.0592	−0.0237	0.0212
t-stat	8.627	−0.5423	0.5729
F-stat (SFE)		3.1636
value		0.1153
Panel D: F = H = 30 days
ACCI	Highest	2	Lowest
MP	−0.1317	−0.0748	−0.0787
t-stat	−2.3276	−1.4707	−1.8586
F-stat (SFE)		0.0976
value		0.9078
Panel E: F = H = 90 days
ACCI	Highest	2	Lowest
MP	−0.0757	0.0232	−0.1043
t-stat	−1.5088	0.7588	−2.1721
F-stat (SFE)		1.5604
value		0.2847

This table presents the daily momentum profits (MP) and related t-statistics (t-stat) of B-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%) for each stock is obtained in the formation period, and we initially classify the stocks based on ACCI. Then, in each group from the previous classifications, the stocks are sorted based on the past price growth rate in the formation period in order to identify winner and loser stocks. The momentum profits (average winner-minus-loser return spread) are thus calculated in the holding period. According to [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 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 90 days to see how they behave in the relatively long run. The sorts based on ACCI are categorized into 3 groups. Winner stocks consist of the one-third of stocks with the highest price growth rate, while loser stocks are made up of the one-third of stocks with the lowest price growth rate. The choices of 90 days and three group classifications arise due to the small sample of B-share stocks (approximately 100 stocks). 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.