Short-term Relative-Strength Strategies, Turnover, and the Connection between Winner Returns and the 52-week High

60 Pages Posted: 8 Jun 2022 Last revised: 1 Aug 2022

See all articles by Chen Chen

Chen Chen

Old Dominion University - Strome College of Business

Chris T. Stivers

University of Louisville

Licheng Sun

Old Dominion University

Date Written: August 1, 2022

Abstract

We contribute with two principal findings that suggest a material role for 52-week-high price anchors in understanding the short-run behavior of one-month stock returns. First, we find that short-term momentum in high-turnover stocks is only evident for stocks whose prices are relatively close to their 52-week high. Conversely, strong reversals are evident for high-turnover stocks whose prices are relatively far from their 52-week high. Second, we find that the apparent price-to-52-week-high (PTH) anchoring biases are asymmetric with a concentration in past winners. High-PTH winners strongly outperform low-PTH winners, across all the different turnover and size segmentations that we examine. Conversely, a comparable PTH-based performance variation in past losers is not evident. This asymmetry is behind our first principal finding. We conduct three supplemental investigations that support a PTH anchoring-bias interpretation for the winner-PTH relation; also evaluating market sentiment, dispersion in analyst forecasted earnings, and firm size.

Keywords: Short-Term stock momentum and reversals, price to 52-week-high ratio, share turnover, price anchor

JEL Classification: G11, G12, G14

Suggested Citation

Chen, Chen and Stivers, Chris T. and Sun, Licheng, Short-term Relative-Strength Strategies, Turnover, and the Connection between Winner Returns and the 52-week High (August 1, 2022). Available at SSRN: https://ssrn.com/abstract=4122300 or http://dx.doi.org/10.2139/ssrn.4122300

Chen Chen

Old Dominion University - Strome College of Business ( email )

Norfolk, VA 23529
United States

Chris T. Stivers (Contact Author)

University of Louisville ( email )

Finance Dept., College of Business
University of Louisville
Louisville, KY 40292
United States
502-852-4829 (Phone)

Licheng Sun

Old Dominion University ( email )

Strome College of Business
Department of Finance
Norfolk, VA 23529-0222
United States

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