Short-term momentum and reversals, turnover, and a stock’s price-to-52-week-high ratio
Journal of Empirical Finance, ISSN: 0927-5398, Vol: 79, Page: 101556
2024
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Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
We show that short-term reversal behavior declines with a stock’s turnover and the prior month’s price-to-52-week-high ratio (PTH), shifting to momentum for stocks with both a relatively high turnover and PTH. This behavior of consecutive one-month individual stock returns is robust to subperiod analysis, risk adjustments, and alternative methodologies. Our findings suggest opposing channels. First, promoting short-term momentum, our evidence implies a PTH-anchoring underreaction to recent news, consistent with the short-term contrarian price-dampening channel of Atmaz et al. (2024) with higher turnover implying a stronger contrarian-induced underreaction. Second, promoting short-term reversals, our evidence reinforces the importance of the well-known liquidity-provision-compensation channel. Reversals are especially strong for low-PTH, low-turnover stocks, where the lower PTH implies a generally smaller-cap, less-liquid stock and the lower turnover implies a weaker contrarian-induced underreaction. We also find that the return behaviors vary with dispersion in analysts’ earnings forecasts and with market-wide sentiment, in a manner consistent with these channels.
Bibliographic Details
http://www.sciencedirect.com/science/article/pii/S0927539824000902; http://dx.doi.org/10.1016/j.jempfin.2024.101556; http://www.scopus.com/inward/record.url?partnerID=HzOxMe3b&scp=85207113919&origin=inward; https://www.ssrn.com/abstract=4122300; http://dx.doi.org/10.2139/ssrn.4122300; https://linkinghub.elsevier.com/retrieve/pii/S0927539824000902; https://dx.doi.org/10.2139/ssrn.4122300; https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4122300; https://ssrn.com/abstract=4122300
Elsevier BV
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