Expensive Anomalies
65 Pages Posted: 9 Mar 2020 Last revised: 9 Nov 2023
Date Written: October 6, 2023
Abstract
We show that thirteen well-known stock market anomalies have higher future abnormal returns when they exhibit a value orientation with respect to their historical levels. We find anomalies that exhibit a value orientation (cheap) outperform anomalies that exhibit a growth orientation (expensive) going forward by about 30 basis points (bps) per month. Furthermore, we find favorable anomalies based on combined value and momentum orientations outperform unfavorable anomalies by about 90 bps per month and exhibit more than double the Sharpe ratios. Alternatively, over 96% of the dollar return for the 13 anomalies disappears when they have negative-momentum and expensive orientations.
Keywords: Anomaly, Momentum, value effect
JEL Classification: G11, G12
Suggested Citation: Suggested Citation