Dynamic Asset (Mis)Pricing: Build-up vs. Resolution Anomalies

44 Pages Posted: 18 Feb 2021 Last revised: 21 Nov 2022

See all articles by Jules H. van Binsbergen

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Martijn Boons

Tilburg University

Christian C. Opp

University of Rochester - Simon Business School; National Bureau of Economic Research (NBER)

Andrea Tamoni

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Multiple version iconThere are 2 versions of this paper

Date Written: February 12, 2021

Abstract

We classify asset pricing anomalies into those exacerbating mispricing (build-up anomalies) and those resolving it (resolution anomalies). We estimate the dynamics of price wedges for well-known anomaly portfolios and map them to firm-level mispricings. We find that several prominent anomalies like momentum and profitability further dislocate prices. Multi-factor models designed to eliminate one-month alphas still produce large price wedges. Our estimates yield a novel decomposition of Tobin’s q, revealing that q's mispricing component has substantial explanatory power for firm investment. Overall, our results suggest that financial intermediaries chasing build-up anomalies negatively affect price efficiency and associated real capital allocation.

Keywords: Mispricing, Price Wedges, Tobin’s q, Real Misallocation

JEL Classification: G02, G11, G12, G14, E22

Suggested Citation

van Binsbergen, Jules H. and Boons, Martijn and Opp, Christian C. and Tamoni, Andrea, Dynamic Asset (Mis)Pricing: Build-up vs. Resolution Anomalies (February 12, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3785040 or http://dx.doi.org/10.2139/ssrn.3785040

Jules H. Van Binsbergen (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen

Martijn Boons

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Christian C. Opp

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrea Tamoni

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

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