Finance professors; 52-week-high momentum researchers
Thomas J. George & Chuan-Yang Hwang
Thomas J. George is Bauer Professor of Finance and director of the AIM Center for Investment Management at the University of Houston (PhD, University of Michigan, 1989). Chuan-Yang Hwang was at the Hong Kong University of Science and Technology's School of Business and Management when they co-wrote 'The 52-Week High and Momentum Investing' (Journal of Finance, 2004). The paper used U.S. stock data from July 1963 to December 2001.
What they argue
- How close a stock is to its 52-week high explains a large part of momentum profits, and forecasts future returns better than past returns themselves.
- Traders anchor on the 52-week high. When good news pushes a price near it, they are reluctant to bid it higher, so the price under-reacts and later catches up.
- Short-term momentum and long-term reversals appear to be separate phenomena, not two halves of one overreaction-and-correction cycle.
Sources
Summaries are Be The Puck's paraphrase of public material. Be The Puck has no affiliation with the people listed.
Books and papers
- The 52-Week High and Momentum Investing, Journal of Finance 59(5): 2145–2176 (2004)
52-week-high momentum
Rule and full recordMomentum · month-end
Stocks trading near their 52-week high tend to keep going, because traders anchor on the old high. Hold while it is close.
Best risk-adjusted results against buy and hold: