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

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.