Assessing Assets Pricing Anomalies

Michael Brennan and Yihong Xia

University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA

Abstract: The optimal portfolio strategy is developed for an investor who has detected an asset pricing anomaly but is not certain that the anomaly is genuine rather than merely apparent. He analysis takes account of the fact that the parameters of both the underlying asset pricing model and the anomalous returns are estimated rather than known. The value that an investor would place on the ability to invest to exploit the apparent anomaly is also derived an illustrative calculations are presented for the Fama and French SMB and HML portfolios, whose returns are anomalous relative to the CAPM.

Date: 1999-01-01
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Citations: View citations in EconPapers (3)

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Journal Article: Assessing Asset Pricing Anomalies (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:cdl:anderf:qt3jx02532

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