Publication Type
Journal Article
Version
acceptedVersion
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
Citation
CHORDIA, Tarun; SUBRAHMANYAM, Avanidhar; and tONG, Qing.
Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?. (2014). Journal of Accounting and Economics. 58, (1), 41-58.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4735
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jacceco.2014.06.001