Post-Holiday Drift, Sentiment and Short-Sale Restriction: Evidence from AH Cross-Listed Stocks

Abstract

This paper investigates whether non-overlapping trading time between two markets can cause return predictability from one market to another. We select cross-listed stocks in mainland China and Hong Kong. A weak return predictability is found in short horizon but no predictability exists in long period. We study two potential factors that may moderate the predictability power: sentiment and short-sale restriction. We find that (1) the return predictability in high sentiment period is stronger than that during low sentiment period; (2) the return predictability, especially in the short-leg portfolio, is increased when trading is restricted by short-sale restriction.

Keywords: Behavioral Finance; Non-Overlapping Trading; Sentiment; Short-Sale Restriction

JEL Classification: G14; D03