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The world of anomalies: Smaller than we think?

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  • Hollstein, Fabian

Abstract

I examine a large set of 124 cross-sectional anomalies in international equity markets. Many of the significant U.S. anomalies replicate in equal-weighted portfolios. However, international equal-weighted portfolios are dominated by microcaps with very limited investment capacity. Only few anomalies survive when mitigating the impact of tiny stocks, accounting for multiple testing, and using factor models to adjust for expected returns. Accounting for the former two, only 15 anomalies yield significant long–short returns in the ex-U.S. world cross-section. Across regions, value anomalies are strongest. In all international markets, except for Asia Pacific, the best U.S. factor models help to further shrink the cross-sections significantly.

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  • Hollstein, Fabian, 2022. "The world of anomalies: Smaller than we think?," Journal of International Money and Finance, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:jimfin:v:129:y:2022:i:c:s0261560622001449
    DOI: 10.1016/j.jimonfin.2022.102741
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    More about this item

    Keywords

    Anomalies; International capital markets; Microcaps; Data mining;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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