When Anomalies Are Publicized Broadly, Do Institutions Trade Accordingly?

64 Pages Posted: 15 Sep 2015 Last revised: 13 May 2017

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: May 1, 2017

Abstract

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

Calluzzo, Paul and Moneta, Fabio and Topaloglu, Selim, When Anomalies Are Publicized Broadly, Do Institutions Trade Accordingly? (May 1, 2017). 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 )

Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Fabio Moneta (Contact Author)

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

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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