52-week-high momentum
MomentumIntermediate
This momentum rule ranks stocks by how close they are to their 52-week high, not by their past return. George and Hwang argued that nearness to the high is a useful way to describe the momentum effect. The portfolio buys the names nearest their highs and shorts the names farthest from them, then holds for a medium horizon.
Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.
- Rules
- Each month, measure price divided by the highest price of the past 252 sessions. Buy the top decile and short the bottom decile in a liquid universe, skipping names under a price or volume floor. Hold about six months, or rebalance monthly with overlap. Do not confuse this with buying a Donchian breakout on one chart and holding it for a day.
- Where AI fits
- AI can build the 252-day high without survivorship bias, dropping names that were not listed at the signal. It can compare this ranking with a 12-minus-1-month return ranking to see whether the holdings differ. The comparison should use the same costs and the same universe.
- Markets
- Liquid stocks. The academic versions use broad U.S. universes.
- Timeframes
- Monthly rebalance, six-month holding in the classic design.
- Risks
- Names at the high can be crowded and can gap on earnings. Shorts of broken stocks are hard to borrow and can rally violently. The rule lags a crash because the high stays in the window for a year. It is related to other momentum sorts even though the input differs.