The Capital Asset Pricing Model

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Variations in the cross-sectional stock returns drive abnormal returns from momentum investments (Choi & Kim, 2014). The Capital Asset Pricing Model explains such variations (Alhenawi, 2015). In the method of constructing momentum portfolios, past stock performance and expected average returns were found positively correlated (Jegadeesh & Titman, 1993, 2001). The correlation between winner returns and loser returns resulted in momentum profits (Alphonse & Nguyen, 2013). This section is an overview of related literature for this research. We group the related literature into the following categories: 1) Sources of momentum returns, 2) Various methods and negative and inconsistent findings, 3) Behavioral vs risk factors, 4) Momentum and efficient market hypothesis, and 5) Momentum and liquidity.
Sources of Momentum Returns
Asset classes. Majority of the past research on price momentum focused on the stocks and found momentum effects (e.g., Haga, 2015; Jegadeesh & Titman, 1993, 2001; Shynkevich, 2012; Jiang, Li, D., & Li, G., 2012; Tekçe & Yılmaz, 2015). Momentum profits were found in
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The relative strength trading strategy was mostly tested using U.S. data and abnormal returns were reported in the US (Haga, 2015; Jegadeesh & Titman, 1993, 2001; Shynkevich, 2012; Jiang et al., 2012). Recent empirical studies have also found price momentum in equities in various countries around the world, including Australia (Li, Stork, Chai, Ee, & Ang, 2014; Schneider & Gaunt, 2012), Belgium (Annaert & Mensah, 2014), and China (Cheema & Nartea, 2014; Ni, Liao, & Huang, 2015). Momentum effect was noticed in Finland (Leivo, 2012), France (Nakhli & Belkacem, 2013), and India (Ansari & Khan, 2012). Other countries where momentum profits were found include Pakistan (Habib-Ur-Rahman & Mohsin, 2012), Spain (Blasco et al., 2012), Taiwan (Chang, 2013), Tunisia (Zoghlami, 2013), Turkey (Ersoy & Ünlü, 2013), United Kingdoms (Siganos, 2012), and Vietnam (Nguyen,

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