Echo effects and the returns from 52-week high strategies

Abstract

Echo effects have been shown by the existing literature to influence the performance of conventional return-based momentum portfolios. This effect has yet to be confirmed for 52-week high momentum strategies. Our results show that the 52-week high strategy also manifests an echo effect. Increasing the skip period between the date of portfolio formation and the date of portfolio purchase 3–6 months significantly improves performance in nearly all cases analyzed. The results are robust to both in-sample and out-of-sample analyses. They are also robust to controlling for the effects on the risk of the portfolio from its return exposure to commonly used empirical return factors.