When Anomalies Are Publicized Broadly, Do Institutions Trade Accordingly?

Management Science (Forthcoming)

58 Pages Posted: 15 Sep 2015 Last revised: 17 Apr 2018

Paul Calluzzo

Queen's University - Smith School of Business

Fabio Moneta

Queen's University - Smith School of Business

Selim Topaloglu

Queen's University - Smith School of Business

Date Written: February 1, 2018

Abstract

This paper studies whether institutional investors trade on 14 well-documented stock market anomalies. We show that there is 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 institutions with high turnover, the subset of investors who likely have the abilities and incentives to act on the anomalies. We directly relate the increase in trading to the observed decay in post-publication anomaly returns. Our results 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

Calluzzo, Paul and Moneta, Fabio and Topaloglu, Selim, When Anomalies Are Publicized Broadly, Do Institutions Trade Accordingly? (February 1, 2018). Management Science (Forthcoming) . Available at SSRN: https://ssrn.com/abstract=2660413 or http://dx.doi.org/10.2139/ssrn.2660413

Paul Calluzzo

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Fabio Moneta (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Selim Topaloglu

Queen's University - Smith School of Business ( email )

437 Goodes Hall
143 Union St.
Kingston, Ontario K7L 3N6
Canada
613-533-6573 (Phone)
613-533-2321 (Fax)

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