The 52-Week High Effect

Ordinary price momentum ranks stocks by their trailing return over, say, the past year and buys the winners. George and Hwang found a related but distinct signal works at least as well: rank stocks by how close their current price sits to its 52-week high, and buy the ones trading nearest that mark. A stock at 98% of its 52-week high tends to keep outperforming a stock at 60% of its high over the following months, even after controlling for ordinary past-return momentum.

Their explanation is anchoring rather than pure trend-following: investors use the visible, easily recalled 52-week high as a mental reference point for "fair value," and they're reluctant to bid a stock above that familiar ceiling even when new information justifies it — so good news gets underreacted to near the high, and the stock keeps drifting upward as the market slowly re-rates it past the anchor. That's a different psychological mechanism than "past winners keep winning," even though the two signals overlap heavily in practice.

The practical wrinkle is that a stock sitting at its 52-week high is, almost by construction, also a recent momentum winner, so isolating the 52-week-high effect's independent contribution requires controlling for standard 12-month momentum in the same regression — which is exactly the test George and Hwang ran to show the anchoring effect survives on its own.