• Yingjie (Roger) Zhu Yingjie (Roger) Zhu

Behavioural finance has attracted increased attention in academic and industry research. The thesis poses research questions on one particular interesting issue around the 52-week high and low price levels. Do they carry any useful information in investors’ financial decision-making? By closely investigating the subsequent performance of stock prices after reaching 52-week highs and lows, the thesis firstly identifies the psychological information the two price levels possess and whether investors exhibit behavioural bias at those price levels. Empirical evidence documented shows that investors treat 52-week high and low price levels as reference points. The thesis demonstrates that investors exhibit different levels of risk tolerance at 52-week high and 52-week low price levels. Secondly, to further understand the anomaly of the 52-week high and low effect, the thesis employs a number of widely adopted asset pricing models to examine whether it can be explained by various traditional asset pricing theories. We conclude that traditional asset pricing frameworks perform quite poorly in terms of explaining the variations in the returns of the 52-week high and low effect.