Review of Financial Studies Vol. 33 No. 5 2020
Replicating Anomalies
Abstract
Most anomalies fail to hold up to currently acceptable standards for empirical finance. With microcaps mitigated via NYSE breakpoints and value-weighted returns, 65% of the 452 anomalies in our extensive data library, including 96% of the trading frictions category, cannot clear the single test hurdle of the absolute t-value of 1.96. Imposing the higher multiple test hurdle of 2.78 at the 5% significance level raises the failure rate to 82%. Even for replicated anomalies, their economic magnitudes are much smaller than originally reported. In all, capital markets are more efficient than previously recognized. Received June 12, 2017; editorial decision October 29, 2018 by Editor Stijn Van Nieuwerburgh.
- DOI
- 10.1093/rfs/hhy131
- Volume
- 33
- Issue
- 5
- Pages
- 2019-2133
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref