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The Cross Section of Stock Returns before World War I

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  • Grossman, Richard S.
  • Shore, Stephen H.

Abstract

We examine the cross section of stock returns using an original dataset consisting of annual observations on price, dividends, and shares outstanding for nearly all stocks listed on U.K. exchanges between 1870 and 1913, supplemented with additional information about attrition. The only clear pattern in the historical U.K. data is the high returns of extremely small stocks. Among the largest 99.8% of stocks, the historical U.K. data do not display the pattern found in modern U.S. (CRSP) data of excess returns for small stocks or stocks with poor past performance. Unlike CRSP data, stocks that do not pay dividends do not outperform stocks that pay small dividends during this period. However, as in the modern data, there is a weak relation between dividend yield and performance for stocks that pay dividends.

Suggested Citation

  • Grossman, Richard S. & Shore, Stephen H., 2006. "The Cross Section of Stock Returns before World War I," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(02), pages 271-294, June.
  • Handle: RePEc:cup:jfinqa:v:41:y:2006:i:02:p:271-294_00
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    Cited by:

    1. Ye, Qing & Turner, John D., 2014. "The cross-section of stock returns in an early stock market," International Review of Financial Analysis, Elsevier, vol. 34(C), pages 114-123.
    2. Annaert, Jan & Mensah, Lord, 2014. "Cross-sectional predictability of stock returns, evidence from the 19th century Brussels Stock Exchange (1873–1914)," Explorations in Economic History, Elsevier, vol. 52(C), pages 22-43.
    3. Turner, John D., 2014. "Financial history and financial economics," QUCEH Working Paper Series 14-03, Queen's University Belfast, Queen's University Centre for Economic History.

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