The 52-Week High and Momentum Investing: Implications for Asset Pricing Models
Julio Lobao () and
Joao Fernandes ()
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Julio Lobao: School of Economics and Management, University of Porto
Joao Fernandes: Department of Public Economics, Faculty of Economics and Business, University of Zaragoza
Annals of Economics and Finance, 2017, vol. 18, issue 2, 349-376
We propose and test a new 4-factor asset pricing model, modifying the method of estimating the momentum risk factor, based on the conclusions of George and Hwang (2004). We proceed to compare the performance of our model with those of Fama and French (1993, 1996) and Carhart (1997)'s. We find that the authors' 52-week high strategy achieves a positive, though statistically insignificant return in 1980-2014, with severely divergent performances in subperiods 1980-2000 (significantly positive) and 2001-2014 (significantly negative). Overall, our model for portfolios built on momentum outperforms the 3-factor model but falls short from Carhart (1997)'s. Subperiod analysis shows results in line with the complete sample for 1980-2000, while both momentum models' performance in subperiod 2001-2014 seems influenced by the unanticipated momentum crash of 2009. We conclude that a momentum risk factor should be included in a given asset pricing model, but evidence suggests it should be based on Jegadeesh and Titman (1993).
Keywords: 52-week high; Momentum; Asset pricing models (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2017:v:18:i:2:lobao
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