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...an losers and momentum profit are the reward of taking risks. Ang et al (2001) indicates winners demonstrate higher performance than their losers because they are characterized by higher correlation with the market index in a declining market. Rachwalski and Wen (2012) also concluded that “a purely risk-based explanation of momentum is insufficient” (Hobson, 2012). It is difficult to explain the momentum effect by the traditional risk –return model ( Fama and French,1996), but underlying mechanism of anomaly could be explain form the perspective of behaviour finance (Jegadeesh and Titman,1993). From the perspective of financial theories, it may have not yet explained the reason of existence of the momentum, but the most cited explanations are the initial information under reaction and delayed overreaction of stock price which related to the behavioural explanation.
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