Momentum Crashes and the 52-Week High

Suk-Joon Byun and Byounghyun Jeon

Financial Analysts Journal, 2023, vol. 79, issue 2, 120-139

Abstract: Momentum strategies suffer from occasional large drawdowns referred to as momentum crashes when the market rebounds. We find that a surge of investor speculation toward stocks far from their 52-week highs can partially explain the momentum crashes. If a momentum strategy is revised to be neutral on a 52-week high effect, momentum crashes are significantly attenuated and the revised strategy does not exhibit procyclical returns. Furthermore, the revised strategy generates a higher Sharpe ratio in different sub-periods and international stock markets.

Date: 2023
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DOI: 10.1080/0015198X.2023.2183706

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