Value and Momentum in Anomalies

Abstract

We document value and momentum across thirteen well-known stock market anomalies. We find anomalies that have performed well in the past month continue to outperform those that have performed poorly by about 60bp per month. These results hold for both relative momentum and absolute momentum across the anomalies. Similarly, we investigate future abnormal returns when anomalies exhibit a value or growth orientation with respect to historical levels. We find anomalies that exhibit a value orientation outperform anomalies that exhibit a growth orientation going forward by about 30bp per month. Furthermore, we find favorable anomalies based on combined momentum and value principles outperform unfavorable anomalies by about 90 bp per month. Our findings further corroborate the hypothesis that mispricing is an important source of anomaly profits.

Keywords: Anomaly, Momentum, value effect

JEL Classification: G11, G12