The 52-Week High, q Theory and the Cross-Section of Stock Returns
51 Pages Posted: 24 Sep 2014 Last revised: 10 Feb 2017
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
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