Aggregate 52-week high, limited attention, and time-varying momentum profits

Weifeng Hung, Ching-Ting Lin and J. Jimmy Yang

Journal of Banking & Finance, 2022, vol. 141, issue C

Abstract: We propose an aggregate 52-week high ratio (AH52) to proxy for scarcity of investor attention and show that AH52 positively predicts future momentum profits. The momentum strategy is profitable as one standard deviation increase in AH52 raises momentum profits by 0.90% per month. AH52 subsumes the predictive power of well-documented market state variables such as market illiquidity, market volatility, and down market state. A timing strategy based on AH52 exhibits a higher annualized Sharpe ratio than that of a passive buy-and-hold strategy. The predictive power of AH52 is robust across market capitalizations, sub-periods, alternative measures of aggregate 52-week high, G7 countries, the inclusion of market-wide information, and various momentum strategies.

Keywords: 52-week high; Attention; Momentum (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:141:y:2022:i:c:s037842662200125x

DOI: 10.1016/j.jbankfin.2022.106531

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