Replicating Anomalies

130 Pages Posted: 8 May 2017 Last revised: 4 Dec 2022

See all articles by Kewei Hou

Kewei Hou

Ohio State University (OSU) - Department of Finance

Chen Xue

University of Cincinnati

Lu Zhang

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: May 2017

Abstract

The anomalies literature is infested with widespread p-hacking. We replicate the entire anomalies literature in finance and accounting by compiling a largest-to-date data library that contains 447 anomaly variables. With microcaps alleviated via New York Stock Exchange breakpoints and value-weighted returns, 286 anomalies (64%) including 95 out of 102 liquidity variables (93%) are insignificant at the conventional 5% level. Imposing the cutoff t-value of three raises the number of insignificance to 380 (85%). Even for the 161 significant anomalies, their magnitudes are often much lower than originally reported. Out of the 161, the q-factor model leaves 115 alphas insignificant (150 with t < 3). In all, capital markets are more efficient than previously recognized.

Suggested Citation

Hou, Kewei and Xue, Chen and Zhang, Lu, Replicating Anomalies (May 2017). NBER Working Paper No. w23394, Available at SSRN: https://ssrn.com/abstract=2964690

Kewei Hou (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

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614-292-0552 (Phone)
614-292-2418 (Fax)

Chen Xue

University of Cincinnati ( email )

College of Business Administration
Cincinnati, OH 45221
United States
(513) 556-7078 (Phone)

Lu Zhang

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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