Customer-Supplier Momentum Spillover and Its Cascading Effect
A new study reveals that stock momentum and company performance can spread through customer-supplier networks in China’s stock market, creating a cascading effect. When a customer’s stock rises, its supplier’s stock often climbs the next month, especially when investors overlook these links. The researchers introduce the Customer-Supplier Momentum (CSMOM) factor, which predicts future returns using advanced network analysis. Notably, indirect supply chain connections also influence stock trends, challenging assumptions about market behavior.
What it examines
This paper studies how stock price momentum and company performance spread through customer-supplier networks in China. Using detailed supply chain and equity data, it shows that investor inattention to complex, multi-layered connections leads to predictable patterns in stock returns and operating results, especially in less obvious network links.
What it concludes
The study finds that deeper, less visible supply chain links strongly predict future stock returns and company performance, especially when investors pay less attention. These insights can help investors and analysts use supply chain data for better trading strategies. Future research could explore other network types and dynamic changes in information flow.
Evidence objects
Momentum in stock returns and company performance cascades through customer-supplier networks in China, with supplier stocks rising after customer successespecially when investors overlook these complex links, revealing a surprising market dynamic.
key_findings bullet 1 · key_findings · validation V0
Researchers introduce the Customer-Supplier Momentum (CSMOM) factor, using advanced network analysis and equity penetration to map supply chains. CSMOM robustly predicts future returns and profitability, even through indirect and less visible connections.
key_findings bullet 2 · key_findings · validation V0
While the studys innovative dataset and methods offer new tools for academics and practitioners, findings are limited to Chinese listed firms and may not capture all global or economic network complexities.
key_findings bullet 3 · key_findings · validation V0
This paper introduces a novel customer-supplier momentum (CSMOM) factor using a unique Chinese supply chain dataset, mapping both direct and indirect equity relationships. Its originality lies in empirically revealing cascading momentum spillovers and linking them to investor inattention, offering fresh insights into network-based return predictability and behavioral finance in quantitative markets.
key_findings bullet 4 · key_findings · validation V0
Raw abstract and provenance
- … listed parents through equity penetration analysis, … equity (ROE), daily volatility over the past 20 trading days (VOL), the average daily turnover ratio over the past 20 trading …
Source row: 490 · abstract type: snippet