When Anomalies Are Publicized Broadly, Do Institutions Trade Accordingly?
Management Science Vol. 65, No. 10, October 2019, pp. 4555–4574
58 Pages Posted: 15 Sep 2015 Last revised: 20 Nov 2019
Date Written: October 1, 2019
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: Suggested Citation