Price (In)efficiency wrt Firm-Specific Information and Anomalies.

46 Pages Posted: 8 May 2020 Last revised: 5 Jul 2023

Date Written: July 05, 2023

Abstract

I develop a Price Efficiency wrt Firm-specific Information (PEFI) measure motivated by the momentum theory literature and examine its relation with 205 momentum and other anomalies. The crossover interaction term between the anomaly variable and PEFI completely subsumes the return predictability of more than 70 percent of anomaly variables that still predict returns in recent data and significantly weakens the return predictability for an additional 10 percent. Results are stronger for last two decades. The empirical evidence suggests that incorrect incorporation of firm-specific information into prices lies at the core of the return predictability of most prevalent asset market anomalies.

Keywords: Momentum, Asset Retruns, Information Delay, Investor Phychology

JEL Classification: G11, G12, G14

Suggested Citation

Parajuli, Bharat Raj, Price (In)efficiency wrt Firm-Specific Information and Anomalies. (July 05, 2023). Available at SSRN: https://ssrn.com/abstract=3576112 or http://dx.doi.org/10.2139/ssrn.3576112

Bharat Raj Parajuli (Contact Author)

Monash University ( email )

900 Dandenong Road
Caulfield East, VIC, 3145
Australia

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
94
Abstract Views
894
Rank
523,966
PlumX Metrics