Aggregated predictability of global anomalies

74 Pages Posted: 11 Nov 2019 Last revised: 24 Apr 2021

Date Written: October 30, 2019

Abstract

I replicate 102 return signals across 48 countries and find a consistently low success rate under
modern empirical standards. A simple anomaly composite (AC) aggregating similar signals (e.g., B/M and E/P) significantly improves the return predictability of major effects (e.g., value) and shows that their performance highly varies across emerging and developed markets. ACs also challenge single signals on their cross-country evidence and suggest that 1) value premium is best explained by investor overextrapolation, 2) investment effect is driven by mispricing rather than optimal investment, and 3) profitability effect likely reflects both optimal investment and investor sentiment.

Keywords: empirical asset pricing, anomalies, international markets, market efficiency, mispricing, limits-to-arbitrage

JEL Classification: G10, G11, G14, G15

Suggested Citation

Dong, Mengmeng, Aggregated predictability of global anomalies (October 30, 2019). Available at SSRN: https://ssrn.com/abstract=3478335 or http://dx.doi.org/10.2139/ssrn.3478335

Mengmeng Dong (Contact Author)

UC Riverside ( email )

Riverside, CA CA 92521
United States

HOME PAGE: http://https://mikedong.org/

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