Last hour momentum in the Chinese stock market

Abstract

Purpose

To capture the last hour momentum over the intraday session, the authors develop a trading strategy for the exchange-traded fund (ETF) that is effective because of the T+0 trading rule. This strategy generates annualized excess return of 9.673%.

Design/methodology/approach

In this study, the authors identify a last hour momentum pattern in which the sixth (seventh) half-hour return predicts the next half-hour return by employing high frequency 2012–2017 data from the China Securities Index (CSI) 300 and its ETF.

Findings

Overall, both the predictability and the trading strategy are statistically and economically significant. In addition, the strategy performs more strongly on high volatility days, high trading volume days, high order-imbalance days and days without economic news releases than on other days.

Originality/value

Noise trading, late-information trading, infrequent rebalancing and disposition effects from retail investors may account for this phenomenon.

Citation

Yang, L. (2022), "Last hour momentum in the Chinese stock market", China Finance Review International, Vol. 12 No. 1, pp. 69-100. https://doi.org/10.1108/CFRI-06-2021-0106