Which stocks drive the size, value, and momentum anomalies and for how long? Evidence from a statistical leverage analysis

Kevin Aretz () and Marc Aretz ()

Financial Markets and Portfolio Management, 2016, vol. 30, issue 1, 19-61

Abstract: A large number of neoclassical, behavioral, and bias-based theories try to explain the tendency of small, value, and winner stocks to outperform big, growth, and loser stocks, three well-known characteristic anomalies. Because the theories often predict similar relationships between a stock’s propensity to contribute to the anomalies and a set of correlated firm characteristics, existing studies focusing on single theories do not tell us which theory is most successful in explaining the anomalies. To fill this gap, we use a new non-parametric methodology to run a horse race between the theories. In the first step, we use statistical leverage analysis to find out which stocks are ultimately responsible for the anomalies. In the second, we use the firm characteristics suggested by the theories to forecast the identity of the anomaly drivers, with the purpose of determining which theory is most supported by the data. We find that behavioral theories are most convincing in explaining the size and book-to-market anomalies, while no theory is convincing in explaining the momentum anomaly. Copyright The Author(s) 2016

Keywords: Characteristic anomalies; Statistical leverage analysis; Efficient markets; G11; G12; G15 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1007/s11408-016-0263-y (text/html)
Access to full text is restricted to subscribers.

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:kap:fmktpm:v:30:y:2016:i:1:p:19-61

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/11408/PS2

DOI: 10.1007/s11408-016-0263-y

Access Statistics for this article

Financial Markets and Portfolio Management is currently edited by Manuel Ammann

More articles in Financial Markets and Portfolio Management from Springer, Swiss Society for Financial Market Research Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().