Long Horizon Mean Reversion for the Brussels Stock Exchange: Evidence for the 19th Century

78 Pages Posted: 4 Mar 2005

See all articles by Jan Annaert

Jan Annaert

University of Antwerp Department of Accounting & Finance; University of Antwerp - Antwerp Management School

Wim Van Hyfte

Ghent University - Department of Financial Economics

Date Written: December 20, 2004

Abstract

In this paper, we introduce a completely new and unique historical dataset of Belgian stock returns during the nineteenth and the beginning of the twentieth century. This high-quality database comprises stock price and company related information on more than 1500 companies. Given the extensive use of CRSP return data and the data mining risks involved it provides a valid out-of-sample dataset to test how robust 'prevailing' asset pricing anomalies are.

We re-examine mean reversals in long horizon returns using an alternative framework of Hodrick (1992) with better small sample properties. Contrary to Fama and French (1988) and Poterba and Summers (1988), our results show that stock prices do not contain autoregressive stationary components but instead resemble a random walk. Capital appreciation returns exhibit stronger time-varying behavior than total returns. Belgian stock returns demonstrate strongly significant seasonality in January notwithstanding the absence of taxes. Moreover, long horizon mean reversion is present, however, completely concentrated in January.

Keywords: Financial market history, market efficiency, univariate stock return predictability

JEL Classification: G10, G14, N23

Suggested Citation

Annaert, Jan and Van Hyfte, Wim, Long Horizon Mean Reversion for the Brussels Stock Exchange: Evidence for the 19th Century (December 20, 2004). EFA 2005 Moscow Meetings Paper. Available at SSRN: https://ssrn.com/abstract=676006 or http://dx.doi.org/10.2139/ssrn.676006

Jan Annaert

University of Antwerp Department of Accounting & Finance ( email )

Faculty of Applied Economics
Prinsstraat 13
Antwerp, B-2000
Belgium

HOME PAGE: http://https://www.uantwerp.be/en/staff/jan-annaert/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Wim Van Hyfte (Contact Author)

Ghent University - Department of Financial Economics ( email )

Ghent, 9000
Belgium

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