The long-run reversal in the long run: Insights from two centuries of international equity returns
The long-run reversal in the long run: Insights from two centuries of international equity returns
We perform the most comprehensive test of long-term reversal in national equity indices ever done. Having examined data from 71 countries for the years 1830 through 2019, we demonstrate a strong reversal pattern: the past long-term return negatively predicts future performance. The phenomenon is not subsumed by other established cross-sectional return patterns, including the value effect. The long-term reversal is robust to many considerations but highly unstable through time. Finally, our findings support the overreaction explanation of this anomaly.
Asset pricing, Country equity indices, Early security data, Equity anomalies, Long-run reversal, Long-term reversal, Return predictability
177-199
Zaremba, Adam
30534111-ed33-47e9-bb18-2163d304eca6
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Raza, Muhammad Wajid
727fdc4e-6a97-4f5d-89fd-1732f30151d5
January 2020
Zaremba, Adam
30534111-ed33-47e9-bb18-2163d304eca6
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Raza, Muhammad Wajid
727fdc4e-6a97-4f5d-89fd-1732f30151d5
Zaremba, Adam, Kizys, Renatas and Raza, Muhammad Wajid
(2020)
The long-run reversal in the long run: Insights from two centuries of international equity returns.
Journal of Empirical Finance, 55, .
(doi:10.1016/j.jempfin.2019.11.007).
Abstract
We perform the most comprehensive test of long-term reversal in national equity indices ever done. Having examined data from 71 countries for the years 1830 through 2019, we demonstrate a strong reversal pattern: the past long-term return negatively predicts future performance. The phenomenon is not subsumed by other established cross-sectional return patterns, including the value effect. The long-term reversal is robust to many considerations but highly unstable through time. Finally, our findings support the overreaction explanation of this anomaly.
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Blind manuscript 20191029
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Title page 2019-10-29
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Accepted/In Press date: 24 November 2019
e-pub ahead of print date: 27 November 2019
Published date: January 2020
Keywords:
Asset pricing, Country equity indices, Early security data, Equity anomalies, Long-run reversal, Long-term reversal, Return predictability
Identifiers
Local EPrints ID: 436972
URI: http://eprints.soton.ac.uk/id/eprint/436972
ISSN: 0927-5398
PURE UUID: 59159cf0-29ca-4162-bfe5-1aa3c4d07d72
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Date deposited: 14 Jan 2020 18:33
Last modified: 18 Mar 2024 03:52
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Author:
Adam Zaremba
Author:
Muhammad Wajid Raza
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