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
Date Written: August 1, 2022
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: Suggested Citation