However, there is a hypothesis that can explain both patterns. Proposed over 10 years ago by two professors, Josef Lakonishok of the University of Illinois and Robert Haugen of the University of California at Irvine, it focuses on portfolio hedging. However, if they buy and sell, and have to worry about their stocks, then they go out looking for information and they remember what they've learned. A lot of people think it is because no one has been able to explain why momentum works. However, a major new study provides a plausible explanation.
Investors respond sluggishly to new information.
Over the past decade, value line has racked up one of the best records among stock-picking services , according to the Hulbert Financial Digest. Recently however, Value Line's stock picks have included lots of duds. Over long periods of time, that strategy works extremely well' says Josef Lakonishok, a professor of finance at the University of Illinois . He and his colleagues Louis K.C. Chan and Narisimhan Jegadeesh have recently completed a study for momentum investing that is slated for publication in the Journal of Finance later this year. The industry is changing so rapidly, they said, that government needs to consider whether it is providing the right kind of regulation.