1. High Momentum and Traditional Momentum Strategies: Evidence from China Traditional Momentum (Jegadeesh and Titman, 1993)  A self-financing strategy that buys the top 20% and sells the bottom 20% of stocks ranked by returns during the past X months, and holds the positions for Y months  X, Y : 3, 6, 9, 12  Significant Profits

2. Formation Period: X monthsHolding Period: Y months At the beginning of each month t, stocks are ranked in ascending order according to past return of past X months. Stocks ranked in the top 20% constitute the winner portfolio, stocks in bottom 20% constitute the loser portfolio, These portfolios are equally weighted. The strategy is to hold, for Y months, a self- financing portfolio that is long the winner and short the loser portfolios Traditional momentum strategy, (X,Y) (JT, 1993) t

3. Literature 52-week (12-month) high momentum (George and Hwang, 2004)  A self-financing strategy that buys the top 20% and sells the bottom 20% of stocks ranked by the nearness of stock price to its 12-month highest price, and holds the positions for 6 months  Nearness to the 52-week high is a better predictor of future returns than are past returns  Nearness to the 52-week high has predictive power whether or not stocks have experienced extreme past returns  Considering investor behavioral bias

4. Formation Period: X monthsHolding Period: Y months At the beginning of each month t, stocks are ranked in ascending order according to nearness ratio based on past X months highest price. Stocks ranked in the top 20% constitute the winner portfolio, stocks in bottom 20% constitute the loser portfolio, These portfolios are equally weighted. The strategy is to hold, for Y months, a self- financing portfolio that is long the winner and short the loser portfolios X-month high momentum strategy, (X,Y) (GH, 2004) t

5. Highest Price: Pt* Stock Price Time Nearness Ratio: Pt/Pt* Formation Period t

6. Motivation Out-of-sample Test and new evidence from China Why studying China Stock Market?  Large proportion of individual investors with short investment horizon  Underdeveloped institutional investors prior to 2003  Poor transparency of information disclosure  Frequent and Inconsistent regulatory changes

7. Motivation George and Hwang (2004)  52-week high is most readily available to investors  Virtually every newspaper that publishes stock prices also identifies the stocks that hit 52-week highs and lows Why are 52-week? How about 26-week high, or 12-week high?

8. Motivation The evidences of traditional momentum in China’s stock market are mixed  Kang, Liu and Ni (2002) Momentum strategy with formation and holding periods of 16, 20, or 26 weeks are significantly profitable  Wang (2004) Momentum strategy with formation and holding periods less than 26 weeks are insignificantly profitable Comparison between traditional momentum and 52-week high momentum

9. Main Issues The profitability of the 52-Week High Momentum Strategy in China market Robustness for formation and holding period Comparison between traditional momentum and 52-week high momentum

10. Major Findings The 52-week high momentum is more profitable in China market than US market. The profitability of x-month high momentum is robust for 6, 9, 12 months formation and holding period Separation between traditional momentum and 52-week high momentum

11. Data and Methodology Center for China Economic Research (CCER) Database Sample Period: January1994 to June 2003 Methodology: JT (1993) and GH (2004).

12. Empirical Results The average monthly return for 52-week high momentum strategy in China’s stock market is 0.84% (t=2.62), which is more significant than that in the U.S. market with an average return of 0.45% (t=2.00).

13. Empirical Results

14. Traditional Momentum strategy Insignificant average return Average Monthly Return (%) t statistics (3,3)-0.36-0.60 (6,3)-0.09-0.18 (6,6)0.150.37 (9,3)0.120.24 (9,6)0.200.39 (9,9)-0.02-0.04 (12,3)0.080.14 (12,6)-0.09-0.15 (12,9)-0.33-0.59 (12,12)-0.49-0.89

15. Empirical Results X-month high Momentum strategy Significant average return Average Monthly Return (%) t statistics (3,3)-0.17-0.45 (6,3)0.441.08 (6,6)0.672.66 (9,3)0.701.53 (9,6)0.762.75 (9,9)0.592.38 (12,3)0.802.01 (12,6)0.842.62 (12,9)0.41.32 (12,12)0.020.04 52-week high momentum strategy

16. Empirical Results No seasonal pattern The abnormal return can not be explained by market model, the Fama and French 3-factor model, or the characteristic model based on size and book-to-market ratio.

17. Empirical Results 52-week high distance: the number of days from the highest price to the end of month t The closer the highest point, the weaker the profits of the strategy

18. Conclusion The average monthly return for 52-week high momentum strategy in China’s stock market is 0.84%, which is more significant than that in the U.S. market China has 52-week high momentum but no traditional momentum. There are some new evidences related to 52-week high momentum strategy