The Review of Asset Pricing Studies Vol. 15 No. 2 2025
Interacting Anomalies
Abstract
An extensive literature studies interactions of stock market anomalies using double-sorted portfolios. But given hundreds of known candidate anomalies, examining selected interactions is subject to a data mining critique. In this paper, we conduct a comprehensive analysis of all possible double-sorted portfolios constructed from 102 underlying anomalies. We find hundreds of statistically significant anomaly interactions, even after accounting for multiple hypothesis testing. An out-of-sample trading strategy that invests in the top backward-looking double-sort strategy generates equal-weighted (value-weighted) monthly average returns of 4% (2.7%) at an annualized Sharpe ratio of 2 (1.38), on par with state-of-the-art anomaly-based machine learning strategies.
- DOI
- 10.1093/rapstu/raaf001
- Volume
- 15
- Issue
- 2
- Pages
- 162-216
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref