Real Anomalies

74 Pages Posted: 16 Mar 2016 Last revised: 25 Sep 2019

See all articles by Jules H. van Binsbergen

Jules H. van Binsbergen

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

Christian C. Opp

University of Rochester - Simon Business School; National Bureau of Economic Research (NBER)

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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, Alpha, Lumpy Investment

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

Suggested Citation

van Binsbergen, Jules H. and Opp, Christian C., Real Anomalies. Journal of Finance, August 2019, Available at SSRN: https://ssrn.com/abstract=2747739 or http://dx.doi.org/10.2139/ssrn.2747739

Jules H. 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 C. Opp (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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