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Real-Time Profitability of Published Anomalies: An Out-of-Sample Test

Author

Listed:
  • Jing-Zhi Huang

    (Smeal College of Business, Pennsylvania State University, University Park, PA 16802, USA)

  • Zhijian Huang

    (Lubar School of Business, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA)

Abstract

Empirical evidence on the out-of-sample performance of asset-pricing anomalies is mixed so far and arguably is often subject to data-snooping bias. This paper proposes a method that can significantly reduce this bias. Specifically, we consider a long-only strategy that involves only published anomalies and non-forward-looking filters and that each year recursively picks the best past-performer among such anomalies over a given training period. We find that this strategy can outperform the equity market even after transaction costs. Overall, our results suggest that published anomalies persist even after controlling for data-snooping bias.

Suggested Citation

  • Jing-Zhi Huang & Zhijian Huang, 2013. "Real-Time Profitability of Published Anomalies: An Out-of-Sample Test," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 3(03n04), pages 1-33.
    • Handle: RePEc:wsi:qjfxxx:v:03:y:2013:i:03n04:n:s201013921350016x
    DOI: 10.1142/S201013921350016X
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    Cited by:

    1. Huang, Jing-Zhi & Huang, Zhijian (James), 2020. "Testing moving average trading strategies on ETFs," Journal of Empirical Finance, Elsevier, vol. 57(C), pages 16-32.

    More about this item

    Keywords

    Published anomalies; data-snooping bias; asset-pricing anomalies; out-of-sample test; JEL Classification: G11; JEL Classification: G14; JEL Classification: D83;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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