Cross-sectional predictability of stock returns, evidence from the 19th century Brussels Stock Exchange (1873-1914)

•A strong momentum premium on the pre-World War I Belgian stock market is found.•No evidence for CAPM beta, nor for a size premium is found.•The evidence is consistent with a leverage-constrained CAPM.•Dividend yields are positively related to average return.

We use pre-World War I Brussels Stock Exchange (BSE) data to investigate the relation between average stock returns and market beta, size, momentum, dividend yield and total risk on the cross-section of stock returns. Based on portfolio sorts and Fama-MacBeth regressions, we find no relationship between market beta, size or total risk and average returns. Momentum is strongly present in the entire data set as well as in subsamples based on size. We also find evidence for a weak value effect as measured by dividend yield. The flat relation between market beta and average return may be due to leverage-constrained investors.