Publication Bias and the Cross-Section of Stock Returns

73 Pages Posted: 6 Jun 2018 Last revised: 1 Jul 2021

See all articles by Andrew Y. Chen

Andrew Y. Chen

Board of Governors of the Federal Reserve System

Tom Zimmermann

University of Cologne

Multiple version iconThere are 2 versions of this paper

Date Written: May, 2018

Abstract

We develop an estimator for publication bias and apply it to 156 hedge portfolios based on published cross-sectional return predictors. Publication bias adjusted returns are only 12% smaller than in-sample returns. The small bias comes from the dispersion of returns across predictors, which is too large to be accounted for by data-mined noise. Among predictors that can survive journal review, a low t-stat hurdle of 1.8 controls for multiple testing using statistics recommended by Harvey, Liu, and Zhu (2015). The estimated bias is too small to account for the deterioration in returns after publication, suggesting an important role for mispricing.

JEL Classification: G10, G12

Suggested Citation

Chen, Andrew Y. and Zimmermann, Tom, Publication Bias and the Cross-Section of Stock Returns (May, 2018). FEDS Working Paper No. 2018-33, Available at SSRN: https://ssrn.com/abstract=3187703 or http://dx.doi.org/10.17016/FEDS.2018.033

Andrew Y. Chen (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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HOME PAGE: http://sites.google.com/site/chenandrewy/

Tom Zimmermann

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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