Investor Disagreement, Liquidity, and Informational Efficiency at the 52 Week High

56 Pages Posted: 6 Nov 2021 Last revised: 6 May 2024

See all articles by Joshua Della Vedova

Joshua Della Vedova

The University of San Diego - Knauss School of Business

Mingze Gao

Macquarie University, Macquarie Business School

Andrew R. Grant

University of Sydney Business School - Discipline of Finance; Financial Research Network (FIRN)

P. Joakim Westerholm

University of Sydney Business School

Barbara A. Bliss

University of San Diego

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

Della Vedova, Joshua and Gao, Mingze and Grant, Andrew R. and Westerholm, P. Joakim and Bliss, Barbara A., Investor Disagreement, Liquidity, and Informational Efficiency at the 52 Week High (September 17, 2021). Available at SSRN: https://ssrn.com/abstract=3925756 or http://dx.doi.org/10.2139/ssrn.3925756

Joshua Della Vedova (Contact Author)

The University of San Diego - Knauss School of Business ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Mingze Gao

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

HOME PAGE: http://mingze-gao.com

Andrew R. Grant

University of Sydney Business School - Discipline of Finance ( email )

H69 Codrington Business School Building
Sydney, NSW 2006
Australia
61-2-9036-6238 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

P. Joakim Westerholm

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Barbara A. Bliss

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

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