Investor Disagreement, Liquidity, and Informational Efficiency at the 52 Week High
56 Pages Posted: 6 Nov 2021 Last revised: 6 May 2024
Date Written: September 17, 2021
Abstract
This study explores how anchor-driven dispersion in trading by retail investors (net sellers) and institutional investors (net buyers) at the 52 week high (52WH) affects stock-level liquidity, efficiency, and returns. Using trade and quote data, we uncover that the investor class disagreement creates an unusual environment in which higher liquidity leads to diminished informational efficiency. At the 52WH, institutions exploit low spreads and greater ask-side depth to execute information-driven purchases. Our findings reveal that the liquidity surge at the 52WH distorts price efficiency and lowers subsequent returns, highlighting a unique anchor where enhanced liquidity paradoxically dampens market quality
Keywords: 52 Week High, Liquidity Clustering, Informational Efficiency
JEL Classification: G12, G14, G40
Suggested Citation: Suggested Citation