Real Anomalies

53 Pages Posted: 16 Mar 2016 Last revised: 6 Mar 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: March 6, 2017

Abstract

We examine the importance of asset pricing anomalies (alphas) for the real economy. We develop a novel quantitative model with lumpy investment that features such informational inefficiencies and yields closed-form solutions for cross-sectional distributions of firm dynamics. Our findings indicate that anomalies can cause material real inefficiencies, raising the possibility that agents that help eliminate them can provide significant value added to the economy. The framework reveals that alphas alone are poor indicators of real distortions, and that efficiency losses depend on the persistence of alphas, 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 (March 6, 2017). 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 Pennsylvania - The Wharton School ( email )

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

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