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      Momentum, idiosyncratic volatility and market dynamics: Evidence from China

      Cheema, Muhammad A.; Nartea, Gilbert V.
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      PBFJ_accepted_manuscript.pdf
      Accepted version, 603.4Kb
      DOI
       10.1016/j.pacfin.2017.09.001
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      Cheema, M. A., & Nartea, G. V. (2017). Momentum, idiosyncratic volatility and market dynamics: Evidence from China. Pacific-Basin Finance Journal. https://doi.org/10.1016/j.pacfin.2017.09.001
      Permanent Research Commons link: https://hdl.handle.net/10289/11420
      Abstract
      Recent evidence on the relation between momentum and idiosyncratic volatility (IV) in the U.S. is mixed. We verify the relation between momentum and IV in China and find at best, no relation supporting the view that idiosyncratic risk is not a significant arbitrage cost for momentum returns. While the absence of a positive relation between momentum returns and IV rejects both the underreaction and the overconfidence and self-attribution stories of momentum, we find support for the overconfidence and self-attribution story from our results on market dynamics and momentum. Our results are robust when verified in other Asian markets. We also find support for the suggestion that cross-country differences in momentum returns could be the result of differences in market dynamics rather than differences in levels of individualism as suggested earlier in the literature.
      Date
      2017
      Type
      Journal Article
      Publisher
      Elsevier
      Rights
      This is an author’s accepted version of an article published in the journal: Pacific-Basin Finance Journal. © 2017 Elsevier.
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      • Management Papers [1135]
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