Anomalies in Stock Market Pricing: Problems in Return Measurements

Wentworth Boynton and Henry R. Oppenheimer
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Wentworth Boynton: University of New Haven
Henry R. Oppenheimer: University of Rhode Island

Journal of Business, 2006, vol. 79, issue 5, pages 2617-2632

Abstract: We study four asset pricing anomalies: market size, contrarian, momentum, and book-to-market premia. We first control for two biases. We control for delisting effects, which create a survivorship bias. We then control for microstructure distortions from the bid-ask spread bounce, which upwardly biases returns when the bid-ask spreads are large. We find that these two biases account for a substantial portion of the market size, contrarian, and book-to-market anomalies. While these bias effects are substantial, they do not invalidate the anomalies. Controlling for bias, the momentum premium strengthens.

Date: 2006

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