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Investor Behavior at the 52-Week High

Published online by Cambridge University Press:  27 December 2022

Joshua Della Vedova Open the ORCID record for Joshua Della Vedova [Opens in a new window] ,
Andrew Grant Open the ORCID record for Andrew Grant [Opens in a new window]  and
P. Joakim Westerholm Open the ORCID record for P. Joakim Westerholm [Opens in a new window]
Joshua Della Vedova*
Affiliation:
University of San Diego Knauss School of Business
Andrew Grant
Affiliation:
University of Sydney Business School andrew.grant@sydney.edu.au
P. Joakim Westerholm
Affiliation:
University of Sydney Business School joakim.westerholm@sydney.edu.au
*
jdellavedova@sandiego.edu (corresponding author)
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Abstract

This study uncovers how household investors intensify the effect of the 52-week high (52WH): increased volume and momentum-like returns at the 52WH price. Using daily household and institutional trading data, we find that households sharply increase their selling, particularly with limit orders at the 52WH price. This behavior is indicative of anchoring, as it is robust to past returns and intensified by proximity, market uncertainty, and salience of the 52WH. This uninformed limit order selling at and prior to the 52WH leads to a doubling of unconditional 52WH anomaly returns. Post-event returns benefit institutions, which act as counterparties.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 7 , November 2023 , pp. 2852 - 2889
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank the anonymous referee, Henk Berkman, Justin Birru, Barbara Bliss, Jennifer Conrad (the editor), Jared DeLisle, Ruchith Dissanayake, Mark Grinblatt, David Hunter, Petko Kalev, Markku Kaustia, Andrew Urquhart, and Mitch Warachka for their valuable feedback that shaped this article. We also wish to thank the seminar participants at the 2017 Australasian Finance and Banking Conference, the 2018 Financial Markets and Corporate Governance Conference, the 2018 University of Melbourne seminar series, the 2018 University of Queensland seminar series, the 2018 European Financial Management Association annual meeting, the 2018 Financial Management Association annual meeting, the 2018 Financial Research Network annual meeting, and the 2019 American Finance Association annual meeting for their comments.

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