Working Paper: NBER ID: w14500
Authors: Benjamin Chabot; Eric Ghysels; Ravi Jagannathan
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.
Keywords: Price Momentum; Victorian Age; Stock Market; Market Efficiency; Investor Behavior
JEL Codes: G1; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market conditions (P42) | momentum profitability (C69) |
| up markets (D40) | momentum profits (C69) |
| prior performance (L25) | future returns (G17) |
| absence of capital gains taxes (H24) | momentum profits (C69) |