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http://hdl.handle.net/10397/95789
Title: | Momentum, reversals, and investor clientele | Authors: | Chui, ACW Subrahmanyam, A Titman, S |
Issue Date: | Feb-2022 | Source: | Review of finance, 16 Feb. 2022, v. 26, no. 2, p. 217-255 | Abstract: | Different share classes on the same firms provide a natural experiment to explore how investor clienteles affect momentum and short-term reversals. Domestic retail investors have a greater presence in Chinese A shares and foreign institutions are relatively more prevalent in B shares. These differences result from currency conversion restrictions and mandated investment quotas. We find that only B shares exhibit momentum and earnings drift and only A shares exhibit monthly reversals. Institutional ownership strengthens momentum in B shares. These patterns accord with a setting where short-term reversals (which represent inventory risk premia) prevail in a market dominated by noise traders and momentum prevails in markets where noise traders are less prevalent relative to informed investors who underreact to fundamental signals. Overall, our findings confirm that clienteles matter in generating stock return predictability from past returns. | Keywords: | Anomalies Market efficiency Liquidity Behavioral finance |
Publisher: | Oxford University Press | Journal: | Review of finance | ISSN: | 1572-3097 | EISSN: | 1875-824X | DOI: | 10.1093/rof/rfac010 | Rights: | © The Author(s) 2022. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved. This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The version of record Chui, A. C. W., Subrahmanyam, A., & Titman, S. (2022). Momentum, Reversals, and Investor Clientele. Review of Finance, 26(2), 217-255 is available online at: https://doi.org/10.1093/rof/rfac010. |
Appears in Collections: | Journal/Magazine Article |
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File | Description | Size | Format | |
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Momentum_Reversal_and_Investment_Clientele.pdf | Pre-Published version | 1.05 MB | Adobe PDF | View/Open |
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