IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v70y2024i9p6002-6025.html
   My bibliography  Save this article

Spanning Analysis of Stock Market Anomalies Under Prospect Stochastic Dominance

Author

Listed:
  • Stelios Arvanitis

    (Department of Economics, Athens University of Economics and Business, 10434 Athens, Greece)

  • Olivier Scaillet

    (University of Geneva, Geneva School of Economics and Management, and Swiss Finance Institute, 1211 Geneva, Switzerland)

  • Nikolas Topaloglou

    (Department of Economics, Athens University of Economics and Business, 10434 Athens, Greece; Institut de Préparation à l’Administration et à la Gestion (IPAG), Business School, 15006 Paris, France)

Abstract

We develop and implement methods for determining whether introducing new securities or relaxing investment constraints improves the investment opportunity set for prospect investors. We formulate a new testing procedure for prospect spanning for two nested portfolio sets based on subsampling and linear programming. In an application, we use the prospect spanning framework to evaluate whether well-known anomalies are spanned by standard factors. We find that of the strategies considered, a few of them expand the opportunity set of the prospect type investors and thus have real economic value for them and involve absence of loss aversion. Those are the net stock issue anomaly under the FF-5 model, the momentum and net stock issue anomalies under the M-4 model, and the momentum anomaly under the q model. In-sample and out-of-sample results prove remarkably consistent in identifying genuine anomalies for prospect investors.

Suggested Citation

  • Stelios Arvanitis & Olivier Scaillet & Nikolas Topaloglou, 2024. "Spanning Analysis of Stock Market Anomalies Under Prospect Stochastic Dominance," Management Science, INFORMS, vol. 70(9), pages 6002-6025, September.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:9:p:6002-6025
    DOI: 10.1287/mnsc.2023.4953
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2023.4953
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2023.4953?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:70:y:2024:i:9:p:6002-6025. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.