16 Pages Posted: 18 Apr 2017
Date Written: April 16, 2017
Received wisdom suggests that when investors correct a mispricing, the return for trading against the mispricing disappears. This paper shows that the return should instead increase as prices adjust to eliminate the mispricing. The repricing returns are large; they correspond to the prior alpha times a duration term that depends on the persistence of the anomaly. I document evidence of repricing returns that went unnoticed in prior research.
Keywords: Anomalies, Cross-Sectional Return Predictability, Market Efficiency
JEL Classification: G00, G12, G14
Suggested Citation: Suggested Citation