Which Anomalies Are More Popular? And Why?
Cornell University - Dyson School of Applied Economics and Management; Korea University - Department of Finance
Florida State University
March 22, 2014
We test, for a wide set of accounting-based anomalies, which anomalies attract the most arbitrage efforts and what this reveals about arbitrageurs’ decision-making process. Arbitrage involvement is inferred via changes in short interest when a security falls into the “short leg” of an anomaly strategy, and we provide evidence that this method succeeds in capturing arbitrage activity. Our evidence suggests that there are striking differences in anomaly popularity and that preference is given to strategies with high Sharpe Ratios and low correlations with other anomaly strategies.
Number of Pages in PDF File: 41
Keywords: Anomalies, Arbitrage Activity
JEL Classification: G11, G12, G14, M41working papers series
Date posted: August 30, 2012 ; Last revised: March 23, 2014
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