An Anecdote of Investor Anxiety and Momentum in China

Table 8

The effect of the daily relative order imbalance: three groups.

Panel A: F = H = 1 day
ROI	Highest	2	Lowest
MP	0.0043	0.0010	0.0025
t-stat	18.1160	5.1436	12.0772
Panel B: F = H = 2 days
ROI	Highest	2	Lowest
MP	0.0027	0.0001	0.0009
t-stat	8.7766	0.4354	3.3701
Panel C: F = H = 3 days
ROI	Highest	2	Lowest
MP	0.0018	0.0000	0.0006
t-stat	5.0259	0.0732	2.0503
Panel D: F = H = 30 days
ROI	Highest	2	Lowest
MP	−0.0218	−0.0177	−0.0153
t-stat	−23.6567	−19.6732	−16.5390
Panel E: F = H = 90 days
ROI	Highest	2	Lowest
MP	−0.0422	−0.0353	−0.0306
t-stat	−28.4790	−24.1903	−21.3626

This table presents the daily momentum profits (MP) and related t-statistics (t-stat) of the 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 for 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 the winner and loser stocks according to the past price growth rate in the formation period and then calculate the momentum profit (average winner-minus-loser return spread) in the holding period. 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 the daily relative order imbalance (ROI) are classified into 3 groups. Winner stocks are the one-third of stocks with the highest price growth rate, while loser stocks are the one-third 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.