A Quantum Leap in Asset Pricing: Explaining Anomalous Returns

James W. Kolari (), Jianhua Huang, Wei Liu and Huiling Liao
Additional contact information
James W. Kolari: Adam C. Sinn ’00 Department of Finance, Mays Business School, Texas A&M University, College Station, TX 77843, USA
Jianhua Huang: Technology and Innovation Center for Digital Economy (TIDE), School of Data Science, The Chinese University of Hong Kong, Shenzhen 518172, China
Wei Liu: Adam C. Sinn ’00 Department of Finance, Mays Business School, Texas A&M University, College Station, TX 77843, USA
Huiling Liao: Applied Mathematics, Illinois Institute of Technology, Chicago, IL 60616, USA

JRFM, 2025, vol. 18, issue 7, 1-28

Abstract: This paper investigates the ability of asset pricing models to explain the cross-section of average stock returns of anomaly portfolios. A large sample of 286 anomaly portfolios are employed. We perform out-of-sample cross-sectional regression tests of both prominent asset pricing models and a relatively new model dubbed the ZCAPM. Empirical tests strongly support the lesser known ZCAPM but not other multifactor models. Further analyses of out-of-sample mispricing errors of the models reveal that the ZCAPM provides much more accurate pricing of anomaly portfolios than other models. We conclude that anomalies are anomalous to popular multifactor models but not the ZCAPM. By implication, the efficient market hypothesis is supported.

Keywords: anomalies; asset pricing models; mispricing error; ZCAPM (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/18/7/362/pdf (application/pdf)
https://www.mdpi.com/1911-8074/18/7/362/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:18:y:2025:i:7:p:362-:d:1692198

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().