Anomalies and False Rejections

Tarun Chordia, Amit Goyal and Alessio Saretto

The Review of Financial Studies, 2020, vol. 33, issue 5, 2134-2179

Abstract: We use information from over 2 million trading strategies randomly generated using real data and from strategies that survive the publication process to infer the statistical properties of the set of strategies that could have been studied by researchers. Using this set, we compute $t$-statistic thresholds that control for multiple hypothesis testing, when searching for anomalies, at 3.8 and 3.4 for time-series and cross-sectional regressions, respectively. We estimate the expected proportion of false rejections that researchers would produce if they failed to account for multiple hypothesis testing to be about 45%.

JEL-codes: C12 G12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (42)

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