What Is 52-Week High/Low?

The 52-week high/low is the highest and lowest price at which a security, such as a stock, has traded during the time period that equates to one year.

Understanding the 52-Week High/Low

A 52-week high/low is a technical indicator used by some traders and investors who view these figures as an important factor in the analysis of a stock’s current value and as a predictor of its future price movement. An investor may show increased interest in a particular stock as its price nears either the high or the low end of its 52-week price range (the range that exists between the 52-week low and the 52-week high).

The 52-week high/low is based on the daily closing price for the security. Often, a stock may actually breach a 52-week high intraday, but end up closing below the previous 52-week high, thereby going unrecognized. The same applies when a stock makes a new 52-week low during a trading session but fails to close at a new 52-week low. In these cases, the failure to register as having made a new closing 52-week high/low can be very significant.

One way that the 52-week high/low figure is used is to help determine an entry or exit point for a given stock. For example, stock traders may buy a stock when the price exceeds its 52-week high, or sell when the price falls below its 52-week low. The rationale behind this strategy is that if a price breaks out from its 52-week range (either above or below that range), there must be some factor that generated enough momentum to continue the price movement in the same direction. When using this strategy, an investor may utilize stop-orders to initiate new positions or add on to existing positions.

It is not uncommon for the volume of trading of a given stock to spike once it crosses a 52-week barrier. In fact, research has demonstrated this. According to a study called “Volume and Price Patterns Around a Stock’s 52-Week Highs and Lows: Theory and Evidence,” conducted by economists at Pennsylvania State University, the University of North Carolina at Chapel Hill, and the University of California, Davis in 2008, small stocks crossing their 52-week highs produced 0.6275% excess gains in the following week. Correspondingly, large stocks produced gains of 0.1795% in the following week. Over time, however, the effect of 52-week highs (and lows) became more pronounced for large stocks. On an overall basis, however, these trading ranges had more of an effect on small stocks as opposed to large stocks.

52-Week High/Low Reversals

A stock that reaches a 52-week high intraday, but closes negative on the same day, may have topped out. This means that its price may not go much higher in the near term. This can be determined if it forms a daily shooting star, which occurs when a security trades significantly higher than its opening, but declines later in the day to close either below or near its opening price. Often, professionals, and institutions, use 52-week highs as a way of setting take-profit orders as a way of locking in gains. They may also use 52-week lows to determine stop-loss levels as a way to limit their losses.

Given the upward bias inherent in the stock markets, a 52-week high represents bullish sentiment in the market. There are usually plenty of investors prepared to give up some further price appreciation in order to lock in some or all of their gains. Stocks making new 52-week highs are often the most susceptible to profit taking, resulting in pullbacks and trend reversals.

Similarly, when a stock makes a new 52-week low intra-day but fails to register a new closing 52-week low, it may be a sign of a bottom. This can be determined if it forms a daily hammer candlestick, which occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or near its opening price. This can trigger short-sellers to start buying to cover their positions, and can also encourage bargain hunters to start making moves. Stocks that make five consecutive daily 52-week lows are most susceptible to seeing strong bounces when a daily hammer forms.

52-Week High/Low Example

Suppose that stock ABC trades at a peak of $100 and a low of $75 in a year. Then its 52-week high/low price is $100 and $75. Typically, $100 is considered a resistance level while $75 is considered a support level. This means that traders will begin selling the stock once it reaches that level and they will begin purchasing it once it reaches $75. If it does breach either end of the range conclusively, then traders will initiate new long or short positions, depending on whether the 52-week high or 52-week low was breached.

What Is the Annual Equivalent Rate (AER)?

The annual equivalent rate (AER) is the interest rate for a savings account or investment product that has more than one compounding period. AER is calculated under the assumption that any interest paid is included in the principal payment’s balance and the next interest payment will be based on the slightly higher account balance.

The AER method means that interest can be compounded several times in a year, depending on the number of times that interest payments are made.

AER is also known as the effective annual interest rate or the annual percentage yield (APY).

The AER is the actual interest rate that an investor will earn for an investment, a loan, or another product, based on compounding. The AER reveals to investors what they can expect to return from an investment (the ROI)—the actual return of the investment based on compounding, which is more than the stated, or nominal, interest rate.

Assuming that interest is calculated—or compounded—more than once a year, the AER will be higher than the stated interest rate. The more compounding periods, the greater the difference between the two will be.

Formula for the AER


$\begin{aligned} &\text{Annual equivalent rate}=\left(1 + \frac{r}{n}\right)^n-1\\ &\textbf{where:}\\ &n=\text{The number of compounding periods (times per year interest is paid)}\\ &r = \text{The stated interest rate}\\ \end{aligned}$​Annual equivalent rate=(1+nr​)n−1where:n=The number of compounding periods (times per year interest is paid)r=The stated interest rate​

How to Calculate the AER

To calculate AER:

1. Divide the stated interest rate by the number of times a year that interest is paid (compounded) and add one.
2. Raise the result to the number of times a year that interest is paid (compounded)
3. Subtract one from the subsequent result.

The AER is displayed as a percentage (%).

Example of AER

Let’s look at AER in both savings accounts and bonds.

For a Savings Account

Assume an investor wishes to sell all the securities in their investment portfolio and place all the proceeds in a savings account. The investor is deciding between placing the proceeds in Bank A, Bank B, or Bank C, depending on the highest rate offered. Bank A has a quoted interest rate of 3.7% that pays interest on an annual basis. Bank B has a quoted interest rate of 3.65% that pays interest quarterly, and Bank C has a quoted interest rate of 3.7% that pays interest semi-annually.

Therefore, Bank A would have an annual equivalent rate of 3.7%, or (1 + (0.037 / 1))¹ – 1. Bank B has an AER of 3.7% = (1 + (0.0365 / 4))⁴ – 1, which is equivalent to that of Bank A even though Bank B is compounded quarterly. It would thus make no difference to the investor if they placed their cash in Bank A or Bank B.

On the other hand, Bank C has the same interest rate as Bank A, but Bank C pays interest semi-annually. Consequently, Bank C has an AER of 3.73%, which is more attractive than the other two banks’ AER. The calculation is (1 + (0.037 / 2))² – 1 = 3.73%.

With a Bond

Let’s now consider a bond issued by General Electric. As of March 2019, General Electric offers a noncallable semiannual coupon with a 4% coupon rate expiring Dec. 15, 2023. The nominal, or stated rate, of the bond, is 8%—or the 4% coupon rate times two annual coupons. However, the annual equivalent rate is higher, given the fact that interest is paid twice a year. The AER of the bond is calculated as (1+ (0.04 / 2 ))² – 1 = 8.16%.

Annual Equivalent Rate vs. Stated Interest

While the stated interest rate doesn’t account for compounding, the AER does. The stated rate will generally be lower than AER if there’s more than one compounding period. AER is used to determine which banks offer better rates and which investments might be attractive.

Advantages and Disadvantages of the AER

The primary advantage of AER is that it is the real rate of interest because it accounts for the effects of compounding. In addition, it is an important tool for investors because it helps them evaluate bonds, loans, or accounts to understand their real return on investment (ROI).

Unfortunately, when investors are evaluating different investment options, the AER is usually not stated. Investors must do the work of calculating the figure themselves. It’s also important to keep in mind that AER doesn’t include any fees that might be tied to purchasing or selling the investment. Also, compounding itself has limitations, with the maximum possible rate being continuous compounding.

Special Considerations

AER is one of the various ways to calculate interest on interest, which is called compounding. Compounding refers to earning or paying interest on previous interest, which is added to the principal sum of a deposit or loan. Compounding allows investors to boost their returns because they can accrue additional profit based on the interest they’ve already earned.

One of Warren Buffett’s famous quotes is, “My wealth has come from a combination of living in America, some lucky genes, and compound interest.” Albert Einstein reportedly referred to compound interest as mankind’s greatest invention. 

When you are borrowing money (in the form of loans), you want to minimize the effects of compounding. On the other hand, all investors want to maximize compounding on their investments. Many financial institutions will quote interest rates that use compounding principles to their advantage. As a consumer, it is important to understand AER so you can determine the interest rate you are really getting.

What Is an 8-K?

An 8-K is a report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the Securities and Exchange Commission (SEC). Also known as a Form 8K, the report notifies the public of events, including acquisitions, bankruptcy, the resignation of directors, or changes in the fiscal year.

Understanding Form 8-K

An 8-K is required to announce significant events relevant to shareholders. Companies usually have four business days to file an 8-K for most specified items.

Documents fulfilling Regulation Fair Disclosure (Reg FD) requirements may be due before four business days have passed. An organization must determine if the information is material and submit the report to the SEC. The SEC makes the reports available through the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) platform.

The SEC outlines the various situations that require Form 8-K. There are nine sections within the Investor Bulletin. Each of these sections may have anywhere from one to eight subsections. The most recent permanent change to Form 8-K disclosure rules occurred in 2004.

Benefits of Form 8-K

First and foremost, Form 8-K provides investors with timely notification of significant changes at listed companies. Many of these changes are defined explicitly by the SEC. In contrast, others are simply events that firms consider to be sufficiently noteworthy. In any case, the form provides a way for firms to communicate directly with investors. The information provided is not filtered or altered by media organizations in any way. Furthermore, investors do not have to watch TV programs, subscribe to magazines, or even wade through financial news websites to get the 8-K.

Form 8-K also provides substantial benefits to listed companies. By filing an 8-K in a timely fashion, the firm’s management can meet specific disclosure requirements and avoid insider trading allegations. Companies may also use Form 8-K to notify investors of any events that they consider to be important.

Finally, Form 8-K provides a valuable record for economic researchers. For example, academics might wonder what influence various events have on stock prices. It is possible to estimate the impact of these events using regressions, but researchers need reliable data. Because 8-K disclosures are legally required, they provide a complete record and prevent sample selection bias.

Criticism of Form 8-K

Like any legally required paperwork, Form 8-K imposes costs on businesses. There is the cost of preparing and submitting the forms, as well as possible penalties for failing to file on time. Although it is only one small part of the problem, the need to file Form 8-K also deters small companies from going public in the first place. Requiring companies to provide information helps investors make better choices. However, it can reduce their investment options when the burden on businesses becomes too high.

Requirements for Form 8-K

The SEC requires disclosure for numerous changes relating to a registrant’s business and operations. Changes to a material definitive agreement or the bankruptcy of an entity must be reported. Other financial information disclosure requirements include the completion of an acquisition, changes in the firm’s financial condition, disposal activities, and substantial impairments. The SEC mandates filing an 8-K for the delisting of a stock, failure to meet listing standards, unregistered sales of securities, and material modifications to shareholder rights.

An 8-K is required when a business changes accounting firms used for certification. Changes in corporate governance, such as control of the registrant or amendments to articles of incorporation, need to be reported. Changes in the fiscal year and modifications of the registrant’s code of ethics must also be disclosed.

The SEC also requires a report upon the election, appointment, or departure of a director or specific officers. Form 8-K must be used to report changes related to asset-backed securities. The form may also be used to meet Regulation Fair Disclosure requirements.

Form 8-K reports may be issued based on other events up to the company’s discretion that the registrant considers to be of importance to shareholders.

What Is an Ad Valorem Tax?

An ad valorem tax is a tax based on the assessed value of an item, such as real estate or personal property. The most common ad valorem taxes are property taxes levied on real estate. However, ad valorem taxes may also extend to a number of tax applications, such as import duty taxes on goods from abroad.

How Ad Valorem Tax Works

The Latin phrase ad valorem means “according to value.” All ad valorem taxes are levied based on the determined value of the item being taxed. In the most common application of ad valorem taxes, which are municipal property taxes, the real estate of property owners is periodically assessed by a public tax assessor to determine its current value. The assessed value of the property is used to compute a tax annually levied on the property owner by a municipality or other government entity.

Ad valorem taxes, which are based on ownership of a real asset, can be looked at in contrast to transactional taxes, such as sales taxes. While ad valorem taxes are determined and levied annually, transactional taxes are only levied at the time of a transaction.

How Ad Valorem Taxes Are Levied

Property ad valorem taxes are usually levied by a municipality but may also be levied by other local government entities, such as counties, school districts, or special taxing districts, also known as special purpose districts. Property owners may be subject to ad valorem taxes levied by more than one entity; for example, both a municipality and a county.

Ad valorem property taxes are typically a major, if not the major, revenue source for both state and municipal governments, and municipal property ad valorem taxes are commonly referred to as simply “property taxes.”

Determining Tax Values

Tax assessments for the purpose of determining ad valorem taxes are typically calculated as of January 1 each year. Ad valorem taxes represent a percentage of the assessed property value, which is commonly the property’s fair market value. Fair market value is the estimated sales price of the property, assuming a transaction between a willing buyer and a willing seller who both have reasonable knowledge of all pertinent facts about the property, and in a situation where neither party has a compulsion to complete the transaction. Fair market value can be more simply understood as just a reasonable price.

Property Subject to Ad Valorem Taxes

Ad valorem taxes are generally levied on both real property and personal property. Real property includes land, buildings and other structures, and any improvements to the property. An example of an improvement is a garage added to a single-family home or a road built on a parcel of land. Personal property ad valorem taxes are most commonly levied only on major personal property holdings, such as a car or boat. Incidental personal property, such as household appliances or clothing, is not usually subject to personal property taxes.