Worldwide security market anomalies

W. T. Ziemba and C. R. Hensel
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W. T. Ziemba: Faculty of Commerce, University of British Columbia, Vancouver, B.C., V6T 1Z2, Canada
C. R. Hensel: Research Department, Frank Russell Company, 909A Street, Tacoma, Washington 98402-1616, U.S.A.

Chapter 17 in Calendar Anomalies and Arbitrage, 2012, pp 385-399 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractSystematic violations of security market efficiency occur in equity markets because of the timing and reaction to cash flows and other information, institutional constraints and policies, and investor behaviour. They lead to significantly different risk-adjusted returns to those expected. Taking these anomalies into account provides opportunity for superior investment performance.Classifying anomalies as fundamental or seasonal differentiates between individual securities and market timing with indices. Seasonal anomalies include the January small-firm, turn-of-the-month, holiday, and day-of-the-week effects. Seasonality calendars combine the various effects to provide daily return forecasts.Fundamental anomalies include price to earnings, price to book, market capitalization, dividend yield, earnings trends and surprises, and mean reversion effects. These variables add explanatory power to that from risk measures and yield factor models to separate the best from the worst performing individual securities.Anomalies are controversial, difficult to measure and variable in time through investor sentiment and futures anticipation. Their study is interesting and challenging, and they are useful in various areas of portfolio management.

Keywords: Calendar Anomalies; Arbitrage; Stock Prices; Stock Returns; US Stock Market; Futures Markets; Betting; Trading Strategies; Sports Market; Lottery Market; Capital Growth Theory; Semi-Strong Market Efficiency; Speculative Investments; Index Futures; Factor Models Based on Fundamental Anomalies; Worldwide Stock Market Strategies (search for similar items in EconPapers)
Date: 2012
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