Where have the profits gone? Market efficiency and the disappearing equity anomalies in country and industry returns

Adam Zaremba (), Mehmet Umutlu and Alina Maydybura

Journal of Banking & Finance, 2020, vol. 121, issue C

Abstract: We are the first to demonstrate the decline in the cross-sectional predictability of country and industry returns in recent years. We examine 53 anomalies in country and industry indices from 64 markets for the years 1973–2018. The profitability of the strategies has significantly decreased recently, driven particularly by the disappearance of value and reversal effects. The phenomenon is strongest in large developed markets. Neither changes in country- and industry-specific risks, nor investor learning from the academic literature can explain the effect. Our findings support the view that the fall in return predictability is caused by the overall improvement in market efficiency.

Keywords: Equity anomalies; Return predictability; International investment; Country returns; Industry returns; Investor learning; Market efficiency; Value; Size; Momentum; Low-risk; Seasonality; Long-run reversal; Behavioral finance; Structural breaks (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G15 G41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:121:y:2020:i:c:s0378426620302284

DOI: 10.1016/j.jbankfin.2020.105966

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