The World of Anomalies: Smaller Than We Think?
84 Pages Posted: 11 Nov 2020 Last revised: 6 Jan 2021
Date Written: September 22, 2020
I examine a large set of 132 cross-sectional anomalies in international equity markets. While many of the significant U.S. anomalies replicate in equally weighted portfolios, only few survive when mitigating the impact of tiny stocks, accounting for multiple testing, and using factor models to adjust for expected returns. Accounting for the former two, only 15 anomalies yield significant long--short returns in the ex-U.S. world cross-section. Most of these are value anomalies. Factor models hardly seem necessary for Japan and the Middle East. In other international markets, the best U.S. factor models help shrink the cross-sections further.
Keywords: Anomalies, international capital markets, mispricing, data mining
JEL Classification: G15, G12, G11
Suggested Citation: Suggested Citation