Questions tagged [anomalies]
A market anomaly (or market inefficiency) is a price and/or rate of return distortion on a financial market that seems to contradict the efficient-market hypothesis, as conceived by Fama (1970) in his seminal paper.
-2
votes
1answer
106 views
Insoluble Enigma [closed]
I used many statistical tools, i.e. t-SNE, SVM, Neural Network, UMAP, PCA, with the reformatted full market depth data with timestamp each second. UMAP gave me the best data representation, but ...
1
vote
0answers
37 views
Trading rules: Controlling the portfolio FDR+ level
I'm trying to apply the FDR+ (False Discovery Rate +) methodology from Bajgrowicz (2011) link another_link. I have computed the p-values with the stationary bootstrap as they did, however I am not ...
10
votes
1answer
183 views
Are the causes of momentum uniform for various asset classes?
Is there any theory which is able to unify and/or falsify existing explanations on the causes of asset price/return momentum? The prevailing theory is that behavioral and cognitive biases lead to ...
4
votes
2answers
204 views
Have any other factor “styles” which explain equity returns been uncovered?
I know this is an inherently broad question, so I will attempt to clarify what I mean by factor "styles". I am not looking for a compendium of "anomalies", per se, but rather for categorical themes ...
0
votes
1answer
22 views
Possible correlations to institutional allocations versus market capitalization
I seem to remember someone telling me a while back that a good indicator of future equity performance was how "institutionally under-owned" a given equity is versus its weight in a given broad market ...
5
votes
4answers
279 views
Why do anomalies disappear after they get detected?
In financial markets, anomalies refer to situations when a security or group of securities performs contrary to the notion of efficient markets, where security prices are said to reflect all available ...
0
votes
1answer
494 views
Daily value weighted return and equally weighted size adjusted
For an event study, can anyone explain me the daily value weighted return for a benchmark and the equally weighted return size adjusted for measuring the EARs and how to calculate both weights?
...
3
votes
1answer
183 views
Practical way to estimate price sensitivity to unexpected earnings (i.e., post-earnings drift)?
Post-earnings announcement drift is a well documented anomaly in financial research. In 2017 May NBER paper, Replicating Anomalies, the authors found that anomalies related to standardized unexpected ...
3
votes
1answer
89 views
Value measures other than P/B
Price-to-book is a very well-studied value measure. What research is there on non-P/B value measures?
I came across a handful used by AQR (Sales/EV, Cash flow/EV, E/P, Forecasted Earnings/Price) but ...
1
vote
1answer
49 views
Testing day of the week effect
I am currently reading a bit about testing day of the weeks effects. I saw two different model specifications and wonder how to interpret the results.
The first model type includes only 4 dummies for ...
9
votes
2answers
1k views
What are the main market anomalies/inefficiencies detected in quantitative finance?
I wondered about the existence of a complete list of the anomalies detected in quantitative finance.
Generally, a market anomaly or inefficiency is a asset price and/or rate of return distortion on a ...
7
votes
2answers
938 views
Distinction between “risk factor” and “market anomaly”
What are some of the general rules to decide whether a particular factor is a "risk factor" or "anomaly?" Naively speaking, can't you put any anomaly factor on the right-hand-side of the regression ...
8
votes
1answer
334 views
What are the empirical limitations to testing market efficiency?
I have encountered a rather elegant argument about the limitations of empirically testing for market efficiency, involving the central point that we do not know whether a result is due to the "true ...
2
votes
1answer
85 views
An Alphabet Effect?
While I prepared some quick and lazy charts picking just the first 10 symbols out of the SP500 for this other question I observed, that the first 10 symbols (figure 1) actually outperformed the larger ...
3
votes
2answers
611 views
When gains are made: Overnight or during trading hours? What is the connection to volatility?
Falkenblog reports an interesting finding: All of the stock returns since 1993 are from overnight returns and cross-sectionally, volatility receives a positive overnight risk premium, a negative ...
3
votes
0answers
106 views
Individual/casual investors and the bias towards blue-chip stocks?
There's quite a bit of research (example, [1]) teasing out the fact that home/casual/individual investors prefer stocks with large positive skewness. It surprised me, as I was reading a bunch of these ...
13
votes
1answer
482 views
Is Arithmetic Return Bias Basis of Low Vol Anomaly?
An observation in capital markets is that the connection between return and risk (measured as volatility) is not that straightforward (at least not as modern portfolio theory assumes). One interesting ...
6
votes
1answer
217 views
what are the most common explanations of the January effect?
The "january effect" is one of the most widely recognized market anomalies. In a nutshell, it refers to the empirical observation that January appears to have systematically higher returns than other ...
31
votes
7answers
2k views
Why do some anomalies persist while others fade away?
In their 1990 book, A Non-Random Walk Down Wall Street, Andrew Lo and Craig MacKinlay document a number of persistent predictable patterns in stock prices. One of these "anomalies" is variously known ...
