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False discoveries in the anomaly research: New insights from the Stock Exchange of Melbourne (1927–1987)

Nusret Cakici, Adam Zaremba (adam.zaremba@ue.poznan.pl), Robert J. Bianchi and Nga Pham

Pacific-Basin Finance Journal, 2021, vol. 70, issue C

Abstract: Are equity anomalies a product of p-hacking in the asset pricing literature? To shed new light on this question, we perform a true out-of-sample study of 30 well-known anomalies in the cross-section of returns. We replicate these anomalies in a novel hand-collected dataset of firms listed on the historical Stock Exchange of Melbourne in the years 1926 to 1987. The vast majority of return-predictive signals cannot be confirmed. Those which are observed are commonly driven by small firms with marginal economic significance. Only a handful of anomalies survive our tests, namely, the dividend yield, value uncertainty, and short-term residual reversal effects. Overall, our findings support the view that many anomalies are statistical artifacts resulting from data mining.

Keywords: Equity anomalies; Replication; Factor investing; Financial history; Australia; Stock Exchange of Melbourne; Asset pricing; Return predictability; The cross-section of returns; False discoveries; P-hacking; Data mining (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 N27 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:70:y:2021:i:c:s0927538x21001827

DOI: 10.1016/j.pacfin.2021.101675

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