The Analysis of 52-Week High Investing Strategy Based on Herding Behavior

The present study develops zero-costing strategies that are based on the 52-week high and herding behavior. Proximity of the current price to the 52-week high and the level of herding behavior of individual/institutional investors are the two criteria used to screen stocks. Because herding behavior affects stocks that are associated with value-related beliefs that investors are reluctant to revise, the level-of-herding criterion uses the 52-week high strategy to improve profits. The present study examines strategy profits in Taiwan, a market in which more than 70% of investors are individuals and where the level of herding among individual investors is higher than that for institutional investors. Empirical results found that profits earned using zero-costing strategies, identified both using the 52-week high and herding, were larger than those earned using only the 52-week high strategy. Furthermore, stocks with values that were far from their 52-week high made significant and positive profits through buy-herding and by shorting sell-herding stocks.