Seasonalities in China's Stock Markets: Cultural Or Structural?

Seasonalities in China's Stock Markets: Cultural Or Structural?

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In this paper, we examine returns in the Chinese A and B stock markets for evidence of calendar anomalies. We find that both cultural and structural (segmentation) factors play an important role in influencing the pricing of both A- and B-shares in China. There is some evidence of a February turn-of-the-year effect, partly owing to the timing of the Chinese Lunar New Year (CNY); and the holiday effect around the CNY period is stronger and more persistent compared with the other public holidays. The segmentation between the two markets is apparent in the day-of-the-week effect, where B stock markets tend to post significant negative returns on Tuesdays, corresponding with overnight developments in the United States, while significant negative returns are observed on Mondays in the A stock markets. Investment strategies based on some of these calendar anomalies, and allowing for transaction costs, suggest that the A stock markets tend to offer more economically significant returns.Lakonishok and Smidt (1988) find that roughly half of the gain in the Dow Jones Industrial Average occurs during the 10 pre-holiday trading days in each year. Using equal- and value-weighted portfolios for the United States stock market, Arielanbsp;...

Title:Seasonalities in China's Stock Markets: Cultural Or Structural?
Author:Jason D. Mitchell, Li L. Ong
Publisher:International Monetary Fund - 2006-01-01


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