Have capital market anomalies attenuated in the recent era of high liquidity and trading activity?

Tarun Chordia, Avanidhar Subrahmanyam and Qing Tong

Journal of Accounting and Economics, 2014, vol. 58, issue 1, 41-58

Abstract: We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the majority of the anomalies have attenuated and the average returns from a portfolio strategy based on prominent anomalies have approximately halved after decimalization. We provide evidence that hedge fund assets under management, short interest and aggregate share turnover have led to the decline in anomaly-based trading strategy profits in recent years. Overall, our work indicates that policies to stimulate liquidity and ameliorate trading costs improve capital market efficiency.

Keywords: Cross-section of stock returns; Anomalies; Market efficiency (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (163)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165410114000275
Full text for ScienceDirect subscribers only

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:eee:jaecon:v:58:y:2014:i:1:p:41-58

DOI: 10.1016/j.jacceco.2014.06.001

Access Statistics for this article

Journal of Accounting and Economics is currently edited by J. L. Zimmerman, S. P. Kothari, T. Z. Lys and R. L. Watts

More articles in Journal of Accounting and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().