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Price Momentum In Stocks: Insights From Victorian Age Data

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Author Info
Benjamin Chabot
Eric Ghysels
Ravi Jagannathan

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Abstract

We find that price momentum in stocks was a pervasive phenomenon during the Victorian age (1866-1907) as well. Momentum strategy profits have little systematic risk even at business cycle frequencies; disappear periodically only to reappear later; exhibit long run reversal; and are higher following up markets, suggesting limited availability of arbitrage capital relative to opportunities during those times. Since there were no capital gains taxes during the Victorian age, the long run reversal of momentum profits must have a fundamental component, that is unrelated to tax based trading, identified by Grinblatt and Moskowitz (2004) using CRSP era data.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14500.

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Date of creation: Nov 2008
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Handle: RePEc:nbr:nberwo:14500

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G1 - Financial Economics - - General Financial Markets
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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    Other versions:
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  3. K. Geert Rouwenhorst, 1998. "International Momentum Strategies," Journal of Finance, American Finance Association, vol. 53(1), pages 267-284, 02. [Downloadable!] (restricted)
    Other versions:
  4. Michael J. Cooper & Roberto C. Gutierrez & Allaudeen Hameed, 2004. "Market States and Momentum," Journal of Finance, American Finance Association, vol. 59(3), pages 1345-1365, 06. [Downloadable!] (restricted)
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  18. Evan Gatev & William N. Goetzmann & K. Geert Rouwenhorst, 2006. "Pairs Trading: Performance of a Relative-Value Arbitrage Rule," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 19(3), pages 797-827. [Downloadable!] (restricted)
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  19. Harrison Hong & Terence Lim & Jeremy C. Stein, 2000. "Bad News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum Strategies," Journal of Finance, American Finance Association, vol. 55(1), pages 265-295, 02. [Downloadable!] (restricted)
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  23. Jegadeesh, Narasimhan & Titman, Sheridan, 1995. "Overreaction, Delayed Reaction, and Contrarian Profits," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 8(4), pages 973-93. [Downloadable!] (restricted)
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  24. Jonathan B. Berk & Richard C. Green & Vasant Naik, 1999. "Optimal Investment, Growth Options, and Security Returns," Journal of Finance, American Finance Association, vol. 54(5), pages 1553-1607, October. [Downloadable!] (restricted)
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