Real-Time Profitability of Published Anomalies: An Out-of-Sample Test
Quarterly Journal of Finance, Volume 3, Issue 3n4, 2013
40 Pages Posted: 17 Mar 2010 Last revised: 25 Aug 2014
Date Written: March 12, 2014
Empirical evidence on the out-of-sample performance of asset-pricing anomalies is mixed so far and arguably is often subject to data-snooping bias. This paper proposes a method that can significantly reduce this bias. Specifically, we consider a long-only strategy that involves only published anomalies and non-forward-looking filters and that each year recursively picks the best past-performer among such anomalies over a given training period. We find that this strategy can outperform the equity market even after transaction costs. Overall, our results suggest that published anomalies persist even after controlling for data-snooping bias.
Keywords: Data-snooping Bias, Asset-pricing Anomalies, Out-of-sample Test, Published Anomalies
JEL Classification: G11, G14, D83
Suggested Citation: Suggested Citation