Does market openness mitigate the impact of culture? An examination of international momentum profits and post-earnings-announcement drift

Jiaqi Guo; Phil Holmes

doi:10.1016/j.intfin.2021.101464

Does market openness mitigate the impact of culture? An examination of international momentum profits and post-earnings-announcement drift

Jiaqi Guo, Phil Holmes^*

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

Abstract

We hypothesise cognitive dissonance arising from the interaction of individualism and sentiment drives cross-country variations in momentum returns and post-earnings-announcement-drift (PEAD) and that market openness mitigates the impact of culture. Empirical analysis of a sample of over 40 stock markets across the globe, supports the hypotheses. Results suggest returns to momentum and PEAD are driven by cognitive dissonance resulting from differences in culture, but the effects of individualism are reduced in more open markets. Mitigating effects are stronger for capital market integration and capital market openness measures than for financial openness. Results from robustness tests support our main findings.

Original language	English
Article number	101464
Journal	Journal of International Financial Markets, Institutions and Money
Volume	76
Early online date	9 Nov 2021
DOIs	https://doi.org/10.1016/j.intfin.2021.101464
Publication status	Published - Jan 2022

Bibliographical note

Publisher Copyright:
© 2021 Elsevier B.V.

Keywords

Culture
Individualism
Momentum
Openness
Post-earnings-announcement drift
Sentiment

ASJC Scopus subject areas

Finance
Economics and Econometrics

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https://eprints.whiterose.ac.uk/180021/Licence: Creative Commons: Attribution-NonCommercial-NoDerivs (CC BY-NC-ND)

Cite this

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AB - We hypothesise cognitive dissonance arising from the interaction of individualism and sentiment drives cross-country variations in momentum returns and post-earnings-announcement-drift (PEAD) and that market openness mitigates the impact of culture. Empirical analysis of a sample of over 40 stock markets across the globe, supports the hypotheses. Results suggest returns to momentum and PEAD are driven by cognitive dissonance resulting from differences in culture, but the effects of individualism are reduced in more open markets. Mitigating effects are stronger for capital market integration and capital market openness measures than for financial openness. Results from robustness tests support our main findings.

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Does market openness mitigate the impact of culture? An examination of international momentum profits and post-earnings-announcement drift

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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