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  • Predictability of future index returns based on the 52 week high strategy

    Author(s)
    Malin, Mirela
    Bornholt, Graham
    Griffith University Author(s)
    Malin, Mirela D.
    Bornholt, Graham N.
    Year published
    2009
    Metadata
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    Abstract
    George and Hwang (2004) show that a stock's 52-week high price explains the momentum effect and that a strategy based on closeness to the 52-week high has better forecasting power for future returns than those strategies based on past returns. In contrast to the existing research at company level, this paper shows that the 52-week high ratio has weak or no predictive power when applied to market indices. In the developed markets, the strategy is weakly profitable and underperforms the momentum strategy while in the emerging markets the strategy earns negative returns. These results also contradict Du (2008) who finds that a ...
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    George and Hwang (2004) show that a stock's 52-week high price explains the momentum effect and that a strategy based on closeness to the 52-week high has better forecasting power for future returns than those strategies based on past returns. In contrast to the existing research at company level, this paper shows that the 52-week high ratio has weak or no predictive power when applied to market indices. In the developed markets, the strategy is weakly profitable and underperforms the momentum strategy while in the emerging markets the strategy earns negative returns. These results also contradict Du (2008) who finds that a 52-week high index strategy dominates momentum in the developed markets.
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    Conference Title
    Asian Finance Association International Conference 2009
    Subject
    Financial Economics
    Publication URI
    http://hdl.handle.net/10072/31828
    Collection
    • Conference outputs

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