Cross-Sectional Anomalies

Keunsoo Kim and Jinho Byun

Chapter 4 in Analysis of the Korean Stock Market:Behavioral Finance Approaches, 2018, pp 103-159 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Asset pricing models suggest that a stock’s performance should not ultimately depend on the stock’s characteristics but on its risk. Academicians, however, have documented several anomalies related to size, book-to-market (B/M) ratio, past returns and so on which cannot be explained by asset pricing models. Several hypotheses and empirical results in the academic literature have been provided to explain the source of these anomalies. On the other hand, practitioners of the asset management industry have paid attention to these anomalies since the anomalies imply that, based on their characteristics, certain categories of stocks can consistently outperform others. According to Bernstein (1995), the investment world developed investment products to take advantage of anomalies long before the academic world agreed that anomalies even exist. However, styling investments based on size and B/M ratio began to spread rapidly within the institutional investor community during the 1980s when academic research confirmed the persistence and robustness of the anomalies…

Keywords: Korean Stock Market; Market Predictability; Trading Behavior; Seasonal Effect; Cross-Sectional Anomalies; Industry Analysis; History of Korean Stock Market (search for similar items in EconPapers)
JEL-codes: P33 (search for similar items in EconPapers)
Date: 2018
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