Abstract
We propose momentum strategies conditional on institutional ownership in China. Portfolios in the strategies only contain stocks with high institutional ownership to reduce disturbance from individual investors. Noise or irrational trading from individual investors covers up the co-movement of stock prices and blocks the expression of the momentum effect. Unlike the benchmark strategies, which generate statistically insignificant returns, our momentum strategies produce 111 significant returns out of the 144 strategies being tested. The effect is stronger if we consider the shell-value contamination. The existence of the momentum effect conditional on institutional ownership is also confirmed by regressions.
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