The 52-Week High, Momentum, and Predicting Mutual Fund Returns

49 Pages Posted: 28 Aug 2009 Last revised: 20 Sep 2011

See all articles by Travis Sapp

Travis Sapp

Iowa State University - Department of Finance

Date Written: April 1, 2010

Abstract

The 52-week high share price has been shown by George and Hwang (2004) to carry significant predictive ability for individual stock returns, dominating other common momentum-based trading strategies. This study examines the performance of trading strategies for mutual funds based on (1) an analogous 1-year high measure for the net asset value of fund shares, (2) prior extreme returns and (3) fund sensitivity to stock return momentum. All three measures have significant, independent, predictive ability for fund returns. Further, each produces a distinctive pattern in momentum profits, whether measured in raw or risk-adjusted returns, with profits from momentum loading being the least transitory. Nearness to the 1-year high and recent extreme returns are significant predictors of fund monthly cash flows, whereas fund momentum loading is not.

Keywords: Mutual fund selection, stock return momentum, momentum trading, momentum investing, momentum profits, 52-week high, return predictability, smart money effect

JEL Classification: G11, G20

Suggested Citation

Sapp, Travis, The 52-Week High, Momentum, and Predicting Mutual Fund Returns (April 1, 2010). Review of Quantitative Finance and Accounting, Vol. 37, pp. 149-179, 2011. Available at SSRN: https://ssrn.com/abstract=1462408

Travis Sapp (Contact Author)

Iowa State University - Department of Finance ( email )

3362 Gerdin Business Bldg.
Ames, IA 50011-1350
United States
515-294-2717 (Phone)
515-294-3525 (Fax)

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