Anomalies Enhanced: Don’t be passive as information arrives

62 Pages Posted: 1 Jul 2015 Last revised: 2 Apr 2018

See all articles by Yufeng Han

Yufeng Han

University of North Carolina (UNC) at Charlotte - Finance

Dayong Huang

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School; China Academy of Financial Research (CAFR)

Date Written: March 27, 2018

Abstract

Many anomalies are based on firm characteristics and are rebalanced yearly, ignoring any information during the year. In this paper, we provide dynamic trading strategies to rebalance the anomaly portfolios monthly. For eight major anomalies, we find that these dynamic trading strategies substantially enhance their economic importance, with improvements in the Fama and French (2015) risk-adjusted abnormal return ranging from 0.40% to 0.75% per month. The results are robust to a number of controls. Our findings indicate that many well known anomalies are more profitable than previously thought, yielding new challenges for their theoretical explanations.

Keywords: Anomaly, low frequency information, volatility timing, technical analysis

JEL Classification: G11, G23

Suggested Citation

Han, Yufeng and Huang, Dayong and Zhou, Guofu, Anomalies Enhanced: Don’t be passive as information arrives (March 27, 2018). Available at SSRN: https://ssrn.com/abstract=2624650 or http://dx.doi.org/10.2139/ssrn.2624650

Yufeng Han

University of North Carolina (UNC) at Charlotte - Finance ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States

Dayong Huang

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

HOME PAGE: http://sites.google.com/a/uncg.edu/dayong-huang/

Guofu Zhou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

China Academy of Financial Research (CAFR)

Shanghai Advanced Institute of Finance
Shanghai P.R.China, 200030
China

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