earticle

영어

This study investigates the effectiveness and profitability of market-dependent momentum investment strategies in the Chinese stock market, focusing on A-shares listed on the Shanghai Stock Exchange. The primary aim is to evaluate whether this strategy, which adjust based on market trends, can outperform traditional momentum strategy and volatility-managed models under different market regimes. To achieve this, the study uses a long-term dataset from January 1999 to December 2024, drawn from the China Stock Market & Accounting Research (CSMAR) database. The traditional momentum strategy, based on Jegadeesh and Titman (1993), involves ranking stocks by past 11-month returns, constructing value-weighted winner and loser portfolios, and forming a Winner-Minus-Loser (WML) portfolio. Beyond the basic model, the study compares the performance of volatility-managed momentum strategies proposed by Barroso and Santa-Clara (2015) and Daniel and Moskowitz (2016), which scale exposures based on estimated volatility or expected returns. Also, we examine Wu et al.’s (2025) market-dependent momentum (MDM) strategy, which switches between WML and reverse WML portfolios depending on whether the market trend is up or down. The results are as follows. Firstly, we confirm that momentum effects are present and significant in the Chinese market, particularly during downturns. This trend is attributed to the conservative behavior of institutional investors, who favor recent outperformers in falling markets. Secondly, among all strategies, Daniel and Moskowitz’s (2016) dynamic model achieves the highest returns but suffers from increased transaction costs due to frequent rebalancing. Wu et al.’s MDM strategy, on the other hand, delivers comparable returns with fewer adjustments, making it a more practical option for investors. Finally, the study reveals that momentum profitability was stronger prior to the 2008 global financial crisis, when the market was more retail-investor-driven and prone to trend-based trading. This study makes several academic contributions. It extends momentum strategy validation to a key emerging market using long-horizon data. It highlights the role of market conditions in shaping strategy performance and presents evidence that simpler, market-adaptive approaches can be as effective as more complex models. These findings offer valuable insights for both academic researchers and practitioners interested in dynamic asset allocation in emerging markets.