ABSTRACT We report that a momentum strategy based on stocks’ 52‐week high (low) prices earns significant returns following positive (negative) sentiment periods only. Further, the performance of the 52‐week high (low) strategy is primarily driven by loser (winner) stocks. We postulate that this asymmetric performance is explained by optimistic (pessimistic) investors’ greater attentiveness to positive (negative) information following positive (negative) sentiment, resulting in stronger underreaction to negative (positive) news associated with the losers (winners). We propose a robust sentiment neutral strategy that combines the 52‐week high and low strategies.
Bhootra et al. (Tue,) studied this question.