News
17.01.2020
The deadline for the 27th Annual MFS Conference is January 19, 2020. Last chance to submit your paper!
read more »
08.01.2020
The latest issue (Vol. 23, No. 3/4) of the Multinational Finance Journal is available online
read more »
27.12.2019
New Forthcoming Article at Multinational Finance Journal
read more »
Forthcoming MFJ Article
27.12.2019



Barra Risk Model Based Idiosyncratic Momentum for the Chinese Equity Market

Sean Lu, Quantitative Management Associates, USA
Cindy Lu, Stanford University, USA

A new approach of constructing an idiosyncratic momentum using common style factors from the Barra risk model has been proposed. The method removes the limitation in the conventional approach of constructing idiosyncratic momentum using Fama-French factors, and allows to build more effective idiosyncratic momentum factor for a wide variety of international markets where the Fama-French model is not available. The performance results indicate that the idiosyncratic momentum factor carries a resemblance to the conventional price momentum, but with much lower variance and exposure to the common market factors, such as value, size, and volatility. The long-short portfolio test for both China’s A-Share IMI and CSI 500 indices in the Chinese equity market demonstrates the significant improvement of this factor’s return over the conventional momentum. The results strongly suggest the idiosyncratic momentum factor could be used as an effective momentum strategy for investing in China’s stock market. 

Keywords:
 stocks; price momentum; idiosyncratic momentum; risk model; regression

Click here to download the full article (pdf)
Click here for more information