Weekly momentum by return interval ranking

Existing research does not find significant momentum profits in many emerging markets including China. We propose an alternative momentum strategy which groups stocks into return intervals rather than percentiles. We apply the method to the China A-share market and find economically significant momentum profits in weekly returns, but not in monthly returns. The weekly momentum lasts for about 1 year. More than half of the profit is realized in the first 3 weeks. We apply the method to other Asian equity markets and find significant weekly momentum in Hong Kong, Taiwan, Korea, Thailand, and Indonesia. These findings suggest that momentum may exist in different formats in different markets. Existence of momentum in a closed equity market like China supports momentum is pervasive in short-term stock returns.

► Existing research find no stable momentum in many emerging markets including China.
► We propose a new momentum strategy: return interval ranking.
► We apply the new strategy and find significant momentum in weekly returns in China A-share market, but not in monthly returns.
► The weekly momentum also exists in Hong Kong, Taiwan, Korean, Thailand, and Indonesia.
► These findings suggest that momentum is persuasive and may exist in different formats.