Expensive Anomalies

65 Pages Posted: 9 Mar 2020 Last revised: 9 Nov 2023

See all articles by Deniz Anginer

Deniz Anginer

Simon Fraser University (SFU)

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies

H. Nejat Seyhun

University of Michigan, Stephen M. Ross School of Business

Luqi Xu

College of Charleston

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

Anginer, Deniz and Ray, Sugata and Seyhun, H. Nejat and Xu, Luqi, Expensive Anomalies (October 6, 2023). Journal of Empirical Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3537724 or http://dx.doi.org/10.2139/ssrn.3537724

Deniz Anginer

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

H. Nejat Seyhun

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-5463 (Phone)

Luqi Xu (Contact Author)

College of Charleston ( email )

66 George Street
Charleston, SC 29424
United States

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