Charles A. Dice Center Working Paper No. 2017-10
146 Pages Posted: 3 May 2017 Last revised: 27 Jul 2017
Date Written: June 12, 2017
The anomalies literature is infested with widespread p-hacking. We replicate this literature by compiling a large data library with 447 anomalies. With microcaps alleviated via NYSE breakpoints and value-weighted returns, 286 anomalies (64%) including 95 out of 102 liquidity variables (93%) are insignificant at the 5% level. Imposing the t-cutoff of three raises the number of insignificance to 380 (85%). Even for the 161 significant anomalies, their magnitudes are often much lower than originally reported. Among the 161, the q-factor model leaves 115 alphas insignificant (150 with t < 3). In all, capital markets are more efficient than previously recognized.
Keywords: Replication, P-Hacking, Anomalies, The q-Factor Model, Efficient Markets
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
Hou, Kewei and Xue, Chen and Zhang, Lu, Replicating Anomalies (June 12, 2017). Fisher College of Business Working Paper No. 2017-03-010; Charles A. Dice Center Working Paper No. 2017-10. Available at SSRN: https://ssrn.com/abstract=2961979 or http://dx.doi.org/10.2139/ssrn.2961979