58 Pages Posted: 15 Sep 2015 Last revised: 4 Sep 2017
Date Written: September 1, 2017
We study whether institutional investors trade on stock market anomalies. Using 14 well-documented anomalies, we observe an increase in anomaly-based trading when information about the anomalies is readily available through academic publication and the release of necessary accounting data. This finding is more pronounced among hedge funds and transient institutions, the subset of investors who likely have the ability and incentives to act on the anomalies. We directly relate the increase in trading to the observed decay in post-publication anomaly returns. Our findings support the role of institutional investors in the arbitrage process and in improving market efficiency.
Keywords: Anomalies, publication impact, arbitrage, institutions, hedge funds
JEL Classification: G12, G14, G23
Suggested Citation: Suggested Citation
Calluzzo, Paul and Moneta, Fabio and Topaloglu, Selim, When Anomalies Are Publicized Broadly, Do Institutions Trade Accordingly? (September 1, 2017). Available at SSRN: https://ssrn.com/abstract=2660413 or http://dx.doi.org/10.2139/ssrn.2660413