Momentum effect is the most common and widely verified stock market anomaly, and daily momentum effect is its embodiment at daily level, but there is still insufficient research on it up to now.In this paper, we conduct an in-depth analysis of daily momentum effect in Chinese A-share market from perspectives of existence and driving force.Using trading data from 2011 to 2020, we find a significant daily momentum effect in Chinese A-share market.Through in-depth analysis, we find that momentum strategy return comes from following day's abnormal returns of stocks that reach the up-(down-)price limit in the highest(lowest)group, and delayed price discovery due to price limit mechanism dominates the formation of daily momentum effect.Through comparison between sample excluding stocks which reach price limit and whole sample, we could find that daily momentum effect is insignificant after exclusion, indicating price limits' dominant role.Overnight-intraday decomposition analysis clarifies that delayed price discovery is the core channel.Comparison of A+H shares performance in different markets, and DID analysis based on natural adjustment of price limit range on Chinese market, provides further empirically confirmed.When price limit's effect weaken or disappear, daily momentum effect will weaken and disappear too.Our study indicates that the unique daily momentum effect presented in A-share market, which is different from foreign stock markets, is actually a special product of delayed price discovery effect.This paper not only deepens understanding of the daily momentum effect of A-share market, but provides inspiration for improving price limit mechanism.
Key words
Momentum effect /
Price limit /
Delayed price discovery /
DID /
A+H shares
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