Discussion paper
DP18196 Anomalies at any time in any place? Momentum, reversal and size around the world in the early twentieth century
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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