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

See all articles by Paul Calluzzo

Paul Calluzzo

Queen's University - Smith School of Business

Fabio Moneta

Telfer School of Management, University of Ottawa

Selim Topaloglu

Queen's University - Smith School of Business

Date Written: October 1, 2019

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? (October 1, 2019). Management Science Vol. 65, No. 10, October 2019, pp. 4555–4574. 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)

Telfer School of Management, University of Ottawa ( email )

136 Jean-Jacques Lussier Street
Ottawa, Ontario K1N 6N5
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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