Anomalies at any time in any place? : Momentum, reversal and size around the world in the early twentieth century

Author / Creator

Braggion, Fabio, author

Available as

Online

Summary

We study equity markets between 1900 and 1925 to provide a pure out-of-sample test of three major asset pricing anomalies: momentum, long-term reversal, and size. We find strong evidence of momentu...

We study equity markets between 1900 and 1925 to provide a pure out-of-sample test of three major asset pricing anomalies: momentum, long-term reversal, and size. We find strong evidence of momentum in almost every market. Momentum is a local phenomenon, as the returns of momentum long-short portfolios have low correlations across markets. We find no evidence of long-term reversals or size effects. In fact, large stocks slightly outperform small stocks in most markets. The presence of momentum, combined with the absence of long-term reversals, indicates that underreaction should be considered as a key aspect of behavioral theories of momentum.

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