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The 52-week High Momentum Strategy and Economic Policy Uncertainty: Evidence from China

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  • Xuemei Zhou
  • Qiang Liu
  • Shuxin Guo

Abstract

This is the first study to examine the 52-week high momentum strategy that takes economic policy uncertainty (EPU) into account. Empirically, we find significant 52-week high momentum in China, the second-largest stock market in the world, and our findings confirm the results of the US. We hypothesize that anchoring biases could explain the 52-week high momentum and generate significant momentum profits in low EPU periods. The empirical results show strong 52-week high momentum in low EPU periods; there is virtually no momentum when EPU is high, which supports our prediction. Further investigations show that there are no long-run reversals for the 52-week high momentum, and the negative impact of EPU on the 52-week high momentum decreases and eventually vanishes over the long term. All evidence supports the hypothesis that the 52-week high momentum is attributed to anchoring biases, especially when we consider EPU.

Suggested Citation

  • Xuemei Zhou & Qiang Liu & Shuxin Guo, 2022. "The 52-week High Momentum Strategy and Economic Policy Uncertainty: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(2), pages 428-440, January.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:2:p:428-440
    DOI: 10.1080/1540496X.2021.1904880
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