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Highs and Lows: A Behavioral and Technical Analysis

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Author Info

  • Bruce Mizrach

    ()
    (Rutgers University)

  • Susan Weerts

    ()
    (Rutgers University)

Abstract

We find that turnover rises on n-day highs and lows and is an increasing function of n. We offer several explanations from the technical and behavioral finance literature for why traders might use these signals. Turnover is persistent following these events, and new lows provide abnormal returns for up to 6 trading days.

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File URL: ftp://snde.rutgers.edu/Rutgers/wp/2006-10.pdf
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Bibliographic Info

Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200610.

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Length: 20 pages
Date of creation: 21 Aug 2006
Date of revision:
Publication status: Published in Applied Financial Economics 19, 2009, 767-77.
Handle: RePEc:rut:rutres:200610

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Keywords: behavioral finance; technical analysis; turnover; n-day high/low; abnormal returns;

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  1. Chip Heath & Steven Huddart & Mark Lang, 1999. "Psychological Factors And Stock Option Exercise," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 601-627, May.
  2. Menkhoff, Lukas & Schmidt, Ulrich, 2005. "The Use of Trading Strategies by Fund Managers: Some First Survey Evidence," Hannover Economic Papers (HEP) dp-314, Leibniz Universit├Ąt Hannover, Wirtschaftswissenschaftliche Fakult├Ąt.
  3. Ferris, Stephen P & Haugen, Robert A & Makhija, Anil K, 1988. " Predicting Contemporary Volume with Historic Volume at Differential Price Levels: Evidence Supporting the Disposition Effect," Journal of Finance, American Finance Association, vol. 43(3), pages 677-97, July.
  4. Meir Statman & Steven Thorley & Keith Vorkink, 2006. "Investor Overconfidence and Trading Volume," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1531-1565.
  5. Nicholas Barberis & Andrei Shleifer & Robert W. Vishny, 1997. "A Model of Investor Sentiment," NBER Working Papers 5926, National Bureau of Economic Research, Inc.
  6. Dan Ariely & George Loewenstein & Drazen Prelec, 2003. ""Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 73-105, February.
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