An International Momentum Study

ABN AMRO released their annual Global Investment Returns Yearbook (hat tip CXO Advisory Group). Per ABN AMRO's synopsis “It is produced for ABN AMRO by London Business School experts Elroy Dimson, Paul Marsh and Mike Staunton, with a contributed chapter by Rolf Elgeti, ABN AMRO’s former Head of Equity Strategy.”

They have a database of stocks, bonds, and foreign exchange going back to 1900 for Australia, Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Spain, Sweden, Switzerland, the United Kingdom, and the United States.

Here is a chart that they provided showing the correlation of the U.S., U.K., German, and Japanese stock markets since 2000. The returns are adjusted for inflation and are in the local currencies. So much for diversification.

They also have a chart showing how stocks have performed in the U.S. and the U.K. since 1900. $1 invested in the U.S. in 1900 would have grown to $239 by the end of 2007. With Dividends reinvested the $1 would have grown to $22,745. £1 invested in the UK would have achieved almost exactly the same results of £22,252 with dividends reinvested.

They also updated a study published by Griffin, Ji, and Martin in the Journal of Finance.

The original study took a look at stocks from around the world going back as far as 1975 up to 2000. The U.S. data went back to 1926. They looked at stocks that were in the top 20% and compared them to stocks that were in the bottom 20% in returns looking back 6 months. They found that the top stocks substantially outperformed the bottom stocks in the next 6 months. The gains reversed over 1 to 5 year timeframes.

The London Business School used a model that looked at the top 20% and bottom 20% stocks based on returns in the last 12 months. They would wait one month, hold for one month, and then rebalance.


Using this model, the top 20% stocks in the U.K. outperformed the bottom 20% by 10.3% since 1900.

Applying this model to 17 countries, they found that the top performing stocks outperformed the bottom stocks in 16 out of 17 countries since 2000. The exception was the U.S.

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