Momentum, Reversals, and Investor Clientele / Andy C.W. Chui, Avanidhar Subrahmanyam, Sheridan Titman.

Format:

Book

Author/Creator:

Chui, Andy C.W.

Contributor:

National Bureau of Economic Research.

Subrahmanyam, Avanidhar.

Titman, Sheridan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29453.

NBER working paper series no. w29453

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

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 momentum is caused by informed investors who underreact to fundamental signals, and short-term reversals represent premia to absorb the demands of noise traders. Overall, our findings confirm that clienteles matter in generating stock return predictability from past returns.

Notes:

Print version record

November 2021.