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Cross-sectional predictability of stock returns, evidence from the 19th century Brussels Stock Exchange (1873–1914)

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  • Annaert, Jan
  • Mensah, Lord

Abstract

We use pre-World War I Brussels Stock Exchange (BSE) data to investigate the relation between average stock returns and market beta, size, momentum, dividend yield and total risk on the cross-section of stock returns. Based on portfolio sorts and Fama–MacBeth regressions, we find no relationship between market beta, size or total risk and average returns. Momentum is strongly present in the entire data set as well as in subsamples based on size. We also find evidence for a weak value effect as measured by dividend yield. The flat relation between market beta and average return may be due to leverage-constrained investors.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:exehis:v:52:y:2014:i:c:p:22-43
    DOI: 10.1016/j.eeh.2013.10.002
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    More about this item

    Keywords

    CAPM; Size effect; Momentum; Total risk; Dividend yield; Brussels Stock Exchange;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G01 - Financial Economics - - General - - - Financial Crises
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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