212 Years of Price Momentum (The World's Longest Backtest: 1801-2012)
University of Pennsylvania - The Wharton School, Finance Department
August 1, 2013
We assemble a dataset of U.S. security prices between 1801 and 1926 and create an out-of-sample test of the price momentum strategy, discovered in the post-1927 data. The pre-1927 momentum profits remain positive and statistically significant. Additional time series data strengthen the evidence that momentum is dynamically exposed to market beta, conditional on the sign and duration of the tailing market state. In the beginning of each market state, momentum’s beta is opposite from the new market direction, generating a negative contribution to momentum profits around market turning points. A dynamically hedged momentum strategy significantly outperforms the un-hedged strategy.
Number of Pages in PDF File: 46
Keywords: Price Momentum, Early Security Prices, Market States, Price Reversal, Hedging
JEL Classification: G12, G14working papers series
Date posted: July 12, 2013 ; Last revised: August 1, 2013
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