News-Linked Momentum in China
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News Link and Predictable Returns
Huaixin Wang
- MOUniversity of Macau
- Tsinghua University
- ?Tsinghua University - PBC School of Finance
- ?University of Macau - Faculty of Business Administration
Strategy in a nutshell
Chinese A-shares (non-financial, Shanghai/Shenzhen) are ranked monthly by residual news-connected-firm (RNCF) returns, which measure peers’ news-driven returns orthogonalized to the focal stock. Long the top quintile, short the bottom. Value-weighted and held one month.
Economic rationale
Investors underreact to value-relevant news from peer firms, creating cross-firm return predictability. Joint news coverage reflects editorial decisions and shared fundamentals, highlighting economic linkages in China’s stock market beyond momentum spillovers.
Backtest performance
Annualised return17.26%
Volatility15.49%
Sharpe ratio1.11