Momentum, Reversals, and Investor Clientele

Finance & Accounting

Speaker:Avanidhar Subrahmanyam, UCLA
Date: Wednesday 3 February 2021
Time: 16:00 - 17:00
Location: Online via Zoom (link available from

Further details

The identical cash flow and control rights of Chinese A and B shares provide a natural experiment to explore how investor clienteles affect stock returns. Currency conversion restrictions discourage domestic retail investors from investing in B shares, whereas quotas constrain foreign institutions’ investment in A shares. We find that only B shares exhibit momentum and earnings drift, and only A shares exhibit shortterm reversals. Institutional ownership strengthens momentum in B shares. These return patterns are consistent with a model that includes institutions, who underreact due to skepticism about outside information sources, and retail investors, who trade on noise.