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The Cross Section of Stock Returns before World War I

Published online by Cambridge University Press:  06 April 2009

Richard S. Grossman  and
Stephen H. Shore
Richard S. Grossman
Affiliation:
rgrossman@wesleyan.edu, Department of Economics, Wesleyan University, Middletown, CT 06459 and Institute for Quantitative Social Science, Harvard University.
Stephen H. Shore
Affiliation:
sshore@wharton.upenn.edu, Wharton School of the University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104.
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Abstract

We examine the cross section of stock returns using an original dataset consisting of annual observations on price, dividends, and shares outstanding for nearly all stocks listed on U.K. exchanges between 1870 and 1913, supplemented with additional information about attrition. The only clear pattern in the historical U.K. data is the high returns of extremely small stocks. Among the largest 99.8% of stocks, the historical U.K. data do not display the pattern found in modern U.S. (CRSP) data of excess returns for small stocks or stocks with poor past performance. Unlike CRSP data, stocks that do not pay dividends do not outperform stocks that pay small dividends during this period. However, as in the modern data, there is a weak relation between dividend yield and performance for stocks that pay dividends.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 41 , Issue 2 , June 2006 , pp. 271 - 294
Copyright
Copyright © School of Business Administration, University of Washington 2006

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