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Anomalies Enhanced: A Dynamic Trading Strategy

56 Pages Posted: 1 Jul 2015 Last revised: 20 Jun 2017

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 - Olin School of Business; CAFR (China Academy for Financial Research)

Date Written: June 19, 2017

Abstract

Many anomalous portfolios are based on annual accounting characteristics and are rebalanced yearly, ignoring any information during the year. In this paper, we provide a simple dynamic trading strategy to incorporate performance information to rebalance the portfolio monthly. For eight major anomalies, we find that the monthly rebalancing portfolios substantially enhance the original anomalies, nearly doubling the average returns while having similar or lower risks. The results are robust to a number of controls. Our findings indicate that annual information can be more profitable than previously thought, yielding new challenges for their theoretical explanations.

Keywords: Anomaly, low frequency information, technical analysis

JEL Classification: G11, G23

Suggested Citation

Han, Yufeng and Huang, Dayong and Zhou, Guofu, Anomalies Enhanced: A Dynamic Trading Strategy (June 19, 2017). Asian Finance Association (AsianFA) 2017 Conference. 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)

CAFR (China Academy for Financial Research)

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

Washington University in St. Louis - Olin School of Business ( 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/

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