The 52-Week High and Momentum Investing

Authors

  • THOMAS J. GEORGE,

  • CHUAN-YANG HWANG

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    • Bauer College of Business, University of Houston, and School of Business and Management, Hong Kong University of Science and Technology, respectively. We thank Joyce Berg, Mark Grinblatt, David Hirshleifer, Tom Rietz, and especially Sheridan Titman and the referee for helpful comments, and Harry Leung for excellent research assistance. George acknowledges financial support of the Bauer professorship and Hwang acknowledges financial support of RGC grant HKUST6011/00H.


ABSTRACT

When coupled with a stock's current price, a readily available piece of information—the 52-week high price–explains a large portion of the profits from momentum investing. Nearness to the 52-week high dominates and improves upon the forecasting power of past returns (both individual and industry returns) for future returns. Future returns forecast using the 52-week high do not reverse in the long run. These results indicate that short-term momentum and long-term reversals are largely separate phenomena, which presents a challenge to current theory that models these aspects of security returns as integrated components of the market's response to news.

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