CAN STOCK PRICE MOMENTUM BE EXPLAINED BY ANCHORING?

Hans-Peter Burghof and Felix Prothmann

The International Journal of Business and Finance Research, 2009, vol. 3, issue 2, 47-69

Abstract: Using German stock data from 1980 to 2008, this study tests whether stock price momentum can be explained by anchoring – a specific form of non-rational behavior. Three different empirical tests indicate that anchoring is the driver of the 52-week high strategy which is long in stocks with a price at or close to their one year high price and short in stocks with a price far from their 52-week high. With sorting and regression approaches, it is further shown that the 52-week high strategy itself largely dominates the momentum strategy and that the distance of a stock’s price to its 52-week high price is a better predictor of future returns than the momentum criterion.

JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:3:y:2009:i:2:p:47-69

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