WFA 2016 Park City Meetings Paper
39 Pages Posted: 23 Sep 2015 Last revised: 15 Jul 2016
Date Written: October 29, 2015
Some of the leading theories of momentum have different empirical predictions about its profitability conditional on market composition and structure. The overconfidence explanation provided by Daniel, Hirshleifer, and Subrahmanyam (1998), for example, predicts lower momentum profits in markets with more sophisticated investors. The information-based theory of Hong and Stein (1999) predicts lower momentum profits in markets with lower informational frictions. The institutional theory of Vayanos and Woolley (2013) predicts lower momentum profits in markets with less agency. In this paper we use a dataset from a major 19th century equity market to test these predictions. Over this period there was no evidence of delegated management in Imperial Russia. A regulatory change in 1893 made speculating on the St. Petersburg stock market more accessible to small investors. We find a momentum effect that is similar in magnitude to those in modern markets, and stronger during the post-1893 period than during the pre-1893 period, consistent with the overconfidence theory of momentum.
Keywords: Momentum, behavioral finance, capital flows, return predictability, asset pricing anomaly
JEL Classification: G10, G12, G14, G23
Suggested Citation: Suggested Citation
Goetzmann, William N. and Huang, Simon, Momentum in Imperial Russia (October 29, 2015). Finance Down Under 2016 Building on the Best from the Cellars of Finance. Available at SSRN: https://ssrn.com/abstract=2663482 or http://dx.doi.org/10.2139/ssrn.2663482