Scaling Up Market Anomalies
31 Pages Posted: 31 Dec 2015 Last revised: 7 Jun 2016
Date Written: April 28, 2016
This paper implements momentum among a host of market anomalies. Our investment universe consists of the 15 top (long-leg) and 15 bottom (short-leg) anomaly portfolios. The proposed active strategy buys (sells short) a subset of the top (bottom) anomaly portfolios based on past one-month return. The evidence shows statistically strong and economically meaningful persistence in anomaly payoffs. Our strategy consistently outperforms a naive benchmark that equal weights anomalies and yields an abnormal monthly return ranging between 1.273% and 1.471%. The persistence is robust to the post-2000 period, and various other considerations, and is stronger following episodes of high investor sentiment.
Keywords: Momentum, anomaly
JEL Classification: G12,G11
Suggested Citation: Suggested Citation