The 52-Week High, q Theory and the Cross-Section of Stock Returns

51 Pages Posted: 24 Sep 2014 Last revised: 10 Feb 2017

See all articles by Thomas J. George

Thomas J. George

University of Houston - Department of Finance

Chuan-Yang Hwang

Nanyang Technological University (NTU)

Yuan Li

University of Cambridge - Judge Business School; University of Cambridge - Cambridge Endowment for Research in Finance (CERF)

Date Written: January 23, 2017

Abstract

Hou, Xue and Zhang’s (2015) q-factor model outperforms other factor models in capturing the PTH (the ratio of current price to 52-week high price) anomaly: High-PTH stocks earn high future returns. PTH’s relations with future profitability and future investment growth are both significantly positive, and they mirror PTH’s relation with future returns in the cross-section and by time horizons. Incorporating the information about future investment growth contained in price level variables (e.g., PTH) helps the q factors to capture better those anomalies rooted in future investment growth. Together, these results suggest that the PTH anomaly is consistent with the investment CAPM.

Keywords: Anchoring, 52-Week High, Investment, Anomalies, Asset Growth, SEOs

Suggested Citation

George, Thomas J. and Hwang, Chuan-Yang and Li, Yuan, The 52-Week High, q Theory and the Cross-Section of Stock Returns (January 23, 2017). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2500335 or http://dx.doi.org/10.2139/ssrn.2500335

Thomas J. George (Contact Author)

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States

Chuan-Yang Hwang

Nanyang Technological University (NTU) ( email )

Singapore, 639798
Singapore
65-67905003 (Phone)
65-6791-3697 (Fax)

Yuan Li

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

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