Price Momentum In Stocks: Insights From Victorian Age Data
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.
We thank Nick Barberis, Jennifer Conrad, Gautam Kaul, Jegadeesh Narasimhan, Lu Zhang, and seminar participants at the University of Michigan for helpful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.