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The long-run reversal in the long run: Insights from two centuries of international equity returns

Adam Zaremba, Renatas Kizys and Muhammad Wajid Raza

Journal of Empirical Finance, 2020, vol. 55, issue C, 177-199

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.

Keywords: Long-term reversal; Long-run reversal; Country equity indices; Early security data; Equity anomalies; Asset pricing; Return predictability (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 N20 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:55:y:2020:i:c:p:177-199

DOI: 10.1016/j.jempfin.2019.11.007

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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