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Real Anomalies

69 Pages Posted: 16 Mar 2016 Last revised: 16 Aug 2017

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Christian C. Opp

University of Pennsylvania - The Wharton School

Multiple version iconThere are 2 versions of this paper

Date Written: August 15, 2017

Abstract

We examine the importance of cross-sectional asset pricing anomalies (alphas) for the real economy. We develop a novel quantitative model of the cross-section of firms that features lumpy investment and informational inefficiencies, while yielding distributions in closed form. Our findings indicate that anomalies can cause material real inefficiencies, raising the possibility that agents that help to eliminate them add significant value to the economy. The framework reveals that the magnitude of alphas alone is a poor indicator of real implications, and highlights the importance of alpha persistence, the amount of mispriced capital, and the Tobin's q of firms affected.

Keywords: Real Misallocations, Asset Pricing Anomalies

JEL Classification: D22, D24, D53, D92, E22, G2, G30

Suggested Citation

van Binsbergen, Jules H. and Opp, Christian C., Real Anomalies (August 15, 2017). Available at SSRN: https://ssrn.com/abstract=2747739 or http://dx.doi.org/10.2139/ssrn.2747739

Jules Van Binsbergen

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen

Christian Opp (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-573-3186 (Phone)

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