52 Week High Momentum Screen
An investing screen based on buying stocks that are close to their 52 week high (and/or selling stocks that are close to their 52 week lows).
Similar to other forms of momentum investing, this seems to work because investors tend to under-react to positive (or negative) information about those kinds of stocks. Researchers surmise that investors use the 52- week high as an “anchor” against which they value stocks, thus they tend to be reluctant to buy a stock as it nears this point regardless of new positive information. As a result, investors underreact when stock prices approach the 52-week high, and consequently, contrary to most investors' expectations, stocks near their 52-week highs tend to be systematically undervalued. Finally, when information prevails and the 52 week high is broken, the market “wakes up” and prices see excess gains.
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