Comparative Analysis of Momentum Effect on the NYSE and the SHSE from the Perspective of Cultural Specifics.

Momentum effect has been widely studied for almost three decades by both behavioral and conventional scientists. It indicates the presence of return predictability on international investment markets across different asset classes, which contradicts to the Efficient Market Hypothesis. Stocks, that have performed best (worst) over the previous short-run, tend to continue to earn high (poor) return over the subsequent up to twelve months. This paper examines the profitability of winners-only momentum trading strategies on the New York Stock Exchange (NYSE) and on the Shanghai Stock Exchange (SHSE) over the period between 1-July-1997 and 31-December-2018. We estimate the performance of 64 momentum trading strategies. The article analyses the relationship between the documented momentum effect on the two capital markets and the cultural characteristics for the corresponding societies on the basis of the 6-Dimensions Culture Model by Hofstede. Outlined are implications for the relation between the rising of momentum effect and cultural specifics. Our empirical results show, that for the overall analyzed sample period there is return predictability, earning about 1% per week for both stock exchanges with some dominancy for the NYSE. [ABSTRACT FROM AUTHOR]