Is the 52 Week High Strategy as Pervasive as Momentum? Evidence from Arabic Market Indices
Research Journal of Finance and Accounting, Vol. 6, No. 22, 2015
8 Pages Posted: 2 Dec 2015
Date Written: November 29, 2015
Existing studies find that momentum can be explained by a strategy based on the 52wk high prices of individual stock and is able to predict returns. This paper uses Arabic market indices data to investigate whether there is momentum and 52wk high strategies and to evaluate the performance of these strategies to achieve the optimal portfolio. We find the 52wk high strategy is unprofitable when applied to Arabic market indices, while the momentum strategy is economically profitable than the 52wk high strategy. The 52wk high effect is not as pervasive and reliable as the momentum effect. After modifying the 52wk high strategy with long-term contrarian using a double sorting procedure, the modified 52wk high strategy has positive profits for all holding periods. However, the momentum strategy is still more profitable than this modified 52wk high strategy.
Keywords: Arabic market indices, long-term contrarian, two-factor model
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