Trends in Capital Market Anomalies
Emory University - Department of Finance
University of California, Los Angeles (UCLA) - Finance Area
Singapore Management University - Lee Kong Chian School of Business
May 25, 2013
We examine whether the recent regime of increased liquidity and volume is associated with attenuation of equity return anomalies via increased arbitrage. We find that several anomalies have attenuated significantly over time, particularly in liquid NYSE/AMEX stocks, and virtually none have significantly accentuated. The profits from a composite strategy based on all of the anomalies show a strong downward trend over time. We provide evidence that hedge fund assets under management, short interest, and the post-decimalization decline in trading costs, are associated with declines in anomaly-based trading strategy profits in recent years.
Number of Pages in PDF File: 50
Keywords: Anomalies, market efficiency, cross-section of returns
JEL Classification: G12, G14working papers series
Date posted: March 27, 2012 ; Last revised: November 14, 2013
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