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http://ssrn.com/abstract=1521329
 
 

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Momentum Cycles and Limits to Arbitrage - Evidence from Victorian England and Post-Depression US Stock Markets


Benjamin Remy Chabot


Federal Reserve Bank of Chicago

Eric Ghysels


University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Ravi Jagannathan


Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER); SAIF; ISB

December 9, 2009


Abstract:     
We evaluate the importance of “Limits to Arbitrage” to explain profitability of momentum strategies. Specifically, when the availability of arbitrage capital is in short supply, momentum cycles last longer, and breaks in momentum cycles are shorter. We demonstrate the robustness of our findings with a unique database of stock returns from 1866-1907 London and the CRSP database. Momentum cycle durations are similar in both databases and all other momentum facts documented in the literature using the CRSP database hold for the Victorian period as well, except for the January reversal due to the absence of capital gains taxation.

Number of Pages in PDF File: 66

Keywords: Limit to arbitrage, Momentum

JEL Classification: G1, G12, G14

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Date posted: December 12, 2009 ; Last revised: February 22, 2014

Suggested Citation

Chabot, Benjamin Remy and Ghysels, Eric and Jagannathan, Ravi, Momentum Cycles and Limits to Arbitrage - Evidence from Victorian England and Post-Depression US Stock Markets (December 9, 2009). Available at SSRN: http://ssrn.com/abstract=1521329 or http://dx.doi.org/10.2139/ssrn.1521329

Contact Information

Benjamin Remy Chabot
Federal Reserve Bank of Chicago ( email )
230 South LaSalle Street
Chicago, IL 60604
United States
Eric Ghysels (Contact Author)
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )
Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)
HOME PAGE: http://www.unc.edu/~eghysels/
Ravi Jagannathan
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
429 Andersen Hall
Evanston, IL 60208
United States
847-491-8338 (Phone)
847-491-5719 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
SAIF ( email )
Shanghai
China
ISB ( email )
Hyderabad, Gachibowli 500 019
India
Feedback to SSRN


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