Chia-Ching Shan is a Master's of Finance student working on a Master's Thesis titled "The 52-week High and Momentum investing Revisited". We look forward to the completion because his research "considers the relationship between the returns on 52-week high strategy and investor sentiment" concludes "The results support that returns on 52-week high strategy are caused by short-term underreaction but not long-term overreaction."

ABSTRACT (Full paper not yet available)

We use common stocks listed on the NYSE, AMEX, and NASDAQ exchanges from January 1965 to December 2008 to compare the differences between two momentum strategies which are 52-week high strategy and JT’s momentum strategy. The JT’s momentum strategy is ranked by returns from the past 6 months, where George and Hwang (2004) use the 52-week high ratio to measure the stock performance. For each of two strategies, we classify stocks into winner, loser, and middle groups based on past returns (52-week high ratio), and then subdivide each group by using the 52-week high ratio (past returns). We find the return on JT strategy is positive only into the 52-week high loser group, but the returns on 52-week high strategy are always significantly positive no matter how past returns are classified. Moreover, we explore whether the 52-week high ratio shows significant explanatory power for stock returns. This paper indicates that the 52-week high ratio can explain the variation of stock returns, and this explanatory power cannot be eliminated by risk-adjustment. This research further explores whether the explanatory power of lagged returns are affected by 52-week high ratio. The empirical results also show that the momentum effect exists in the short-term, which can be eliminated by risk adjustment. While the momentum effect from medium-term is attributed to 52-week high ratio. Finally, we also consider the relationship between the returns on 52-week high strategy and investor sentiment. The results support that returns on 52-week high strategy are caused by short-term underreaction but not long-term overreaction.

Source: http://thesis.lib.ncu.edu.tw/ETD-db/ETD-search/view_etd?URN=974208001#anchor