The gap between you and your peers matters: The net peer momentum effect in China
We propose a new return predictive signal: the net peer momentum (NPM), defined as the excess return on analyst-connected firms (CF) over the focal firm. Examining its pricing effect in the Chinese equity market reveals a robust cross-sectional relationship: stocks with high NPM significantly outperform those with low NPM. Accordingly, a long-short strategy based on NPM quintiles earns over 1% per month. While both CF and NPM offer incremental pricing power, NPM exhibits a stronger effect, as it incorporates both information about peer firms and the degree of investor underreaction to such information.
Authors
- Adam Zaremba (ORCID: https://orcid.org/0000-0001-5879-9431)
- Zhongwei Yao (ORCID: https://orcid.org/0000-0002-9989-749X)
- Huaigang Long (ORCID: https://orcid.org/0000-0002-9608-9200)
- Congcong Wang (ORCID: https://orcid.org/0000-0001-7245-3074)
- Rui Zhu
Institutions
- Poznań University of Economics and Business (PL)
- Zhejiang University of Finance and Economics (CN)
Publication Details
- Journal
- Modern Finance
- Published
- 2025-08-14
- DOI
- https://doi.org/10.61351/mf.v3i3.347
- Citations
- 3
- Primary Topic
- Corporate Finance and Governance
- Type
- article
- Field-Weighted Citation Impact
- 11.73
Funders
- National Natural Science Foundation of China
- Natural Science Foundation of Zhejiang Province