Individualism and Momentum around the World





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    • Andy C.W. Chui is from the School of Accounting and Finance, Hong Kong Polytechnic University. Sheridan Titman is from the McCombs School of Business, University of Texas at Austin and NBER. K.C. John Wei is from the School of Business Management, Hong Kong University of Science and Technology. The authors appreciate helpful comments and suggestions from Kalok Chan, David Chapman, Ferdinand Gul, Harrison Hong, Ming Huang, Roger Huang, Xu Huang, Pete Kyle, Tobias Moskowitz, Mitchell Petersen, and seminar participants at Barclays Global Investors, Baylor, Goldman Sachs Asset Management, Hong Kong Polytechnic University, Hong Kong University of Science and Technology, National Chengchi University, National Dong-Hwa University, Peking University, Singapore Management University, Texas Tech, University of Texas at Austin, the 2004 Hong Kong University of Science and Technology Symposium on Investment and Behavioral Finance, the 12th Conference on the Theories and Practices of Securities and Financial Markets, the 2004 NTU International Conference on Finance, the 2006 American Finance Association Annual Meeting, the 2007 Vienna Symposium on Asset Management, the 2008 Cheung Kong Graduate School of Business Finance Research Summer Camp, and the 2009 China International Conference in Finance. The paper received the best paper award at the 12th Conference on the Theories and Practices of Securities and Financial Markets. The authors thank the editor (Cam Harvey), an anonymous associate editor, and two anonymous reviewers for their constructive comments and suggestions and Dr. Virginia Unkefer for editorial assistance. We also thank Man Hong Chan for his research assistance. Andy C.W. Chui acknowledges financial support from Hong Kong Polytechnic University (project no.: G-U266). K.C. John Wei gratefully acknowledges financial support from a research project competition (RPC) grant at HKUST of the Hong Kong Special Administration Region, China (project no.: RPC07/08.BM11).


This paper examines how cultural differences influence the returns of momentum strategies. Cross-country cultural differences are measured with an individualism index developed by Hofstede (2001), which is related to overconfidence and self-attribution bias. We find that individualism is positively associated with trading volume and volatility, as well as to the magnitude of momentum profits. Momentum profits are also positively related to analyst forecast dispersion, transaction costs, and the familiarity of the market to foreigners, and negatively related to firm size and volatility. However, the addition of these and other variables does not dampen the relation between individualism and momentum profits.