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Two Centuries of Price Return Momentum

58 Pages Posted: 12 Jul 2013 Last revised: 4 Sep 2016

Christopher Geczy

University of Pennsylvania - The Wharton School, Finance Department

Mikhail Samonov

Forefront Analytics

Date Written: January 25, 2016

Abstract

We assemble a monthly dataset of U.S. security prices between 1801 and 1926 and, both in and out of sample, test price-return momentum strategies 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 risk, conditional on the sign and duration of the trailing market state. In the beginning of each market state, momentum’s equity 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.

Keywords: Price Momentum, Early Security Prices, Market States, Price Reversal, Hedging

JEL Classification: G12, G14

Suggested Citation

Geczy, Christopher and Samonov, Mikhail, Two Centuries of Price Return Momentum (January 25, 2016). Financial Analysts Journal, Vol. 72, No. 5 (September/October 2016). Available at SSRN: https://ssrn.com/abstract=2292544 or http://dx.doi.org/10.2139/ssrn.2292544

Christopher Geczy

University of Pennsylvania - The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
(215) 898-1698 (Phone)
(215) 898-6200 (Fax)

Mikhail Samonov (Contact Author)

Forefront Analytics ( email )

100 Front St
West Conshohocken, PA 19428
United States
8189163640 (Phone)

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