ATM NOW $7, page-23

"Influential research on New Highs was published by Thomas George and Chuan-Yang Hwang in 2004, which found that they were a major driver of momentum. Momentum is the tendency for price trends to persist over the short to medium term, and it’s often linked to how investors think and behave.

George and Hwang reckoned that investors used the 52-week high as a reference point, or anchor. They found that when new-news comes along about a company, it can take days, weeks or even months for the price to shift upwards because of this ‘anchoring’ effect. In essence, existing investors are simply slow to bid the price higher, while onlookers are reluctant to buy at the new high. This is where the term post-earnings announcement drift comes from.

On average, companies that issue extreme positive surprises see more muted share price action the closer their prices are to their 52-week high. But crucially, this corrects itself over time and the prices of these shares rise much more strongly on subsequent announcements.

The momentum effects that are triggered by new highs have been found to be powerful and can continue to drive prices higher over many months. Combined with another momentum driver - strong positive earnings surprises - the most recent research points to a more pronounced upward drift in prices over time. Buying shares hitting new highs is undoubtedly a tough strategy for some investors, but the evidence still points to momentum being one of the most powerful drivers of returns in the market".