International Review of Business, Trade, and Economics
Policy Momentum Harvesting in the Chinese A-shares Market
Abstract
Ryan Bian
It is understood that traditional momentum strategies have performed inconsistently in the Chinese A-shares market, but value strategies have performed well. This paper argues that such variability arises from regulatory policy cycles acting as exogenous shocks that conditionally drive momentum, amplifying trends during easing phases while disrupting them during tightening phases. In this context, momentum should be viewed as a time-varying and natural consequence of regulatory policymaking. We incorporate spanning tree networks to isolate momentum pockets during such regulatory shocks. Drawing upon data from 2010 to 2025, the objective is to explore a dynamic process through the application of minimum and maximum spanning trees within a case study framework. Our focus will be on six pre-selected regulatory events, which will be mapped onto equity market clusters identified through tree-based methods. We believe that the experiment will provide a renewed opportunity for researchers and market participants to reignite the development of a better understanding of the momentum anomaly, particularly during market dislocations in the context of Chinese A-shares. Our fundamental contribution lies in two aspects: first, we link market regime shifts to regulatory events and engage with relevant A-shares literature from a practical perspective; second, we provide a helpful empirical case study to hopefully inform academics and practitioners on the never-ending topic regarding the essence of the momentum factor.