IDEAS home Printed from https://ideas.repec.org/a/eee/quaeco/v50y2010i4p501-508.html
   My bibliography  Save this article

Predictability of future index returns based on the 52-week high strategy

Author

Listed:
  • Malin, Mirela
  • Bornholt, Graham

Abstract

In a landmark paper, George and Hwang (2004) show that a stock's 52-week high price largely explains the momentum effect and that a strategy based on closeness to the 52-week high has better forecasting power for future returns than do momentum strategies. We find that the 52-week high strategy is unprofitable when applied to emerging markets indices, and that it is significantly less profitable than the corresponding momentum strategy. Overall the 52-week high effect is not as pervasive as the momentum effect.

Suggested Citation

  • Malin, Mirela & Bornholt, Graham, 2010. "Predictability of future index returns based on the 52-week high strategy," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(4), pages 501-508, November.
  • Handle: RePEc:eee:quaeco:v:50:y:2010:i:4:p:501-508
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1062-9769(10)00043-8
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Harrison Hong & Jeremy C. Stein, 1999. "A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets," Journal of Finance, American Finance Association, vol. 54(6), pages 2143-2184, December.
    2. Richards, Anthony J, 1997. " Winner-Loser Reversals in National Stock Market Indices: Can They Be Explained?," Journal of Finance, American Finance Association, vol. 52(5), pages 2129-2144, December.
    3. repec:hrv:faseco:30747159 is not listed on IDEAS
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    5. K. Geert Rouwenhorst, 1998. "International Momentum Strategies," Journal of Finance, American Finance Association, vol. 53(1), pages 267-284, February.
    6. Timothy C. Johnson, 2002. "Rational Momentum Effects," Journal of Finance, American Finance Association, vol. 57(2), pages 585-608, April.
    7. Narasimhan Jegadeesh & Sheridan Titman, 1999. "Profitability of Momentum Strategies: An Evaluation of Alternative Explanations," NBER Working Papers 7159, National Bureau of Economic Research, Inc.
    8. Balvers, Ronald J. & Wu, Yangru, 2006. "Momentum and mean reversion across national equity markets," Journal of Empirical Finance, Elsevier, vol. 13(1), pages 24-48, January.
    9. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
    10. Ben Marshall & Rachael Cahan, 2005. "Is the 52-week high momentum strategy profitable outside the US?," Applied Financial Economics, Taylor & Francis Journals, vol. 15(18), pages 1259-1267.
    11. Jonathan Lewellen, 2002. "Momentum and Autocorrelation in Stock Returns," Review of Financial Studies, Society for Financial Studies, vol. 15(2), pages 533-564, March.
    12. Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    13. Tobias J. Moskowitz & Mark Grinblatt, 1999. "Do Industries Explain Momentum?," Journal of Finance, American Finance Association, vol. 54(4), pages 1249-1290, August.
    14. Conrad, Jennifer & Kaul, Gautam, 1998. "An Anatomy of Trading Strategies," Review of Financial Studies, Society for Financial Studies, vol. 11(3), pages 489-519.
    15. Halbert White, 2000. "A Reality Check for Data Snooping," Econometrica, Econometric Society, vol. 68(5), pages 1097-1126, September.
    16. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
    17. John M. Griffin & Xiuqing Ji & J. Spencer Martin, 2003. "Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole," Journal of Finance, American Finance Association, vol. 58(6), pages 2515-2547, December.
    18. Charles M.C. Lee & Bhaskaran Swaminathan, 2000. "Price Momentum and Trading Volume," Journal of Finance, American Finance Association, vol. 55(5), pages 2017-2069, October.
    19. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:bla:irvfin:v:17:y:2017:i:1:p:77-106 is not listed on IDEAS

    More about this item

    Keywords

    52-Week high Momentum Emerging markets Index returns;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:50:y:2010:i:4:p:501-508. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/620167 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.