Publication Type

Journal Article

Version

Postprint

Publication Date

8-2014

Abstract

We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the majority of the anomalies have attenuated and the average returns from a portfolio strategy based on prominent anomalies have approximately halved after decimalization. We provide evidence that hedge fund assets under management, short interest and aggregate share turnover have led to the decline in anomaly-based trading strategy profits in recent years. Overall, our work indicates that policies to stimulate liquidity and ameliorate trading costs improve capital market efficiency.

Keywords

Cross-section of stock returns, Anomalies, Market efficiency

Discipline

Business | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Accounting and Economics

Volume

58

Issue

1

First Page

41

Last Page

58

ISSN

0165-4101

Identifier

10.1016/j.jacceco.2014.06.001

Publisher

Elsevier

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://dx.doi.org/10.1016/j.jacceco.2014.06.001

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