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Raw Returns Risk-Adjusted Returns Raw Returns Risk-Adjusted Returns Monthly return Monthly return to (6,6) strategy to (6,6) strategy Monthly return to (6,12) strategy Monthly return to
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ABSTRACT When coupled with a stock's current price, a readily available piece of information—the 52‐week high price–explains a large portion of the profits from momentum investing. Nearness to the 52‐week high dominates and improves upon the forecasting power of past returns (both individual and industry returns) for future returns. Future returns forecast using the 52‐week high do not reverse in the long run. These results indicate that short‐term momentum and long‐term reversals are largely separate phenomena, which presents a challenge to current theory that models these aspects of security returns as integrated components of the market's response to news.
The Journal of Finance – Wiley
Published: Oct 1, 2004
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