The 52-week high strategy and information uncertainty
Tóm tắt
This paper examines the driver of the 52-week high strategy, which is long in stocks close to their 52-week high price and short in stocks with a price far below their one-year high, and tests the hypothesis that this strategy’s profitability can be explained by anchoring—a behavioral bias. To test the null, we examine whether the 52-week high criterion has more predictive power in cases of larger information uncertainty. This hypothesis is based on the psychological insight that behavioral biases increase in uncertainty. For six proxies of ambiguity, we document a positive relationship to returns of 52-week high winner stocks and a negative relationship to returns of 52-week high loser stocks. The opposite effect of information uncertainty on winner and loser stocks implies that the 52-week high profits are increasing in uncertainty measures. Moreover, the study documents that the six variables have a similar impact on momentum profits. Hence, we cannot reject the hypothesis that anchoring explains the profits of the 52-week high strategy and that it is the driver of the momentum anomaly.
Tài liệu tham khảo
Agyei-Ampomah, S.: The post-cost profitability of momentum trading strategies: further evidence from the UK. European Financial Management, pp. 776–802 (2003)
Barberis, N., Thaler, R.: A survey of behavioral finance. Working Paper (2002)
Barberis, N., Shleifer, A., Vishny, R.: A model of investor sentiment. J. Financ. Econ. 49, 307–343 (1998)
Barry, C., Brown, S.: Differential information and security market equilibrium. J. Financ. Quant. Anal. 20, 407–422 (1985)
Bessler, W., Bittelmeyer, C.: Patents and the performance of technology firms. Evidence from initial public offerings in Germany. Financ. Mark. Portf. Manag. 22, 232–356 (2008)
Burghof, H.P., Prothmann, F.: Can stock price momentum be explained by anchoring? Int. J. Bus. Finance Res. 3(2), 47–70 (2009)
Daniel, K., Titman, S.: Market efficiency in an irrational world. Financ. Anal. J. 55, 28–40 (1999)
Daniel, K., Hirshleifer, D., Subrahamanyam, A.: Investor psychology and security market over- and underreactions. J. Finance 53, 1839–1886 (1998)
Daniel, K., Hirshleifer, D., Subrahamanyam, A.: Overconfidence, arbitrage, and equilibrium asset pricing. J. Finance 56, 921–965 (2001)
Diether, K., Malloy, C., Scherbina, A.: Differences of opinion and the cross section of stock returns. J. Finance 57, 2113–2141 (2002)
Fama, F., French, K.R.: Common risk factors in the returns on stocks and bonds. J. Financ. Econ. 33, 3–56 (1993)
Fama, F., French, K.R.: Market efficiency, long-term returns, and behavioral finance. J. Financ. Econ. 49, 283–306 (1998)
Ferris, S., D’Mello, R., Wang, C.-Y.: The tax-loss selling hypothesis, market liquidity, and price pressure around the turn-of-the-year. J. Financ. Mark. 6, 73–98 (2001)
Forner, C., Marhuenda, J.: Contrarian and momentum strategies in the Spanish stock market. Eur. Financ. Manag. 9, 67–88 (2003)
George, T., Hwang, C.Y.: The 52-week high and momentum investing. J. Finance 59, 2145–2176 (2004)
Grinblatt, M., Han, B.: The disposition effect and momentum. NBER Working Paper Series (2002)
Grundy, B., Martin, J.: Understanding the nature of the risk and the source of the rewards to momentum investing. Working Paper, University of Chicago (1999)
Hirshleifer, D.: Investor psychology and asset pricing. J. Finance 56, 4866–1597 (2001)
Hong, H., Lim, T., Stein, J.: Bad news travels slowly: size, analyst coverage and the profitability of momentum strategies. J. Finance 40, 265–295 (2000)
Imhoff, E.A., Lobo, G.J.: The effect of ex ante earnings uncertainty on earnings response coefficients. Account. Rev. 67, 427–429 (1992)
Jegadeesh, N., Titman, S.: Returns to buying winners and selling losers: implications for stock market efficiency. J. Finance 48, 65–91 (1993)
Jegadeesh, N., Titman, S.: Profitability of momentum strategies: an evaluation of alternative explanations. J. Finance 56, 699–720 (2001)
Kahneman, D., Tversky, A.: Judgment Under Uncertainty: Heuristics and Biases. Cambridge University Press, Cambridge (1982)
Lang, M., Lundholm, R.: Corporate disclosure policy and analyst behavior. Account. Rev. 71, 467–492 (1996)
Lim, T.: Rationality and analysts’ forecast bias. J. Finance 56, 369–385 (2001)
Lo, A., MacKinlay, C.: When are contrarian profits due to stock market overreaction? Rev. Financ. Stud. 3, 175–205 (1990)
Moskowitz, T., Grinblatt, M.: Do industries explain momentum? J. Finance 54, 1249–1290 (1999)
Rey, D., Schmid, M.: Feasible momentum strategies: evidence from the Swiss stock market. Financ. Mark. Portf. Manag. 21, 325–352 (2007)
Rouwenhorst, K.: International momentum strategies. J. Finance 53, 267–284 (1998)
Siganos, A.: Can small investors exploit the momentum effect. Financ. Mark. Portf. Manag. 24(2), 171–192 (2010)
Tversky, A., Kahneman, D.: Judgment under uncertainty: heuristics and biases. Science 185, 1124–1131 (1974)
Zhang, F.: Information uncertainty and stock returns. J. Finance 61, 105–136 (2006)