How Factor Anomaly Returns Change After Publication Across Markets

Summary

This review summarizes research comparing the returns of published stock market anomalies before and after academic publication. The study examines 241 anomalies across the United States and 38 international markets, constructing long-short returns and comparing in-sample, post-sample, and post-publication periods. It also considers equal and market-cap weighting, risk-adjusted returns, factor groups, and proxies for limits to arbitrage.

The reported decline after publication is statistically and economically meaningful in the United States, while international markets show no comparable general decline. The result persists after risk adjustment and matching anomalies with similar prior returns. Returns are also associated with measures of higher arbitrage costs, which the study interprets as evidence more consistent with mispricing than data mining. These are findings from a historical sample and depend on anomaly definitions, publication dates, market coverage, and data processing choices; they do not guarantee that any particular factor will persist or disappear.

Key ideas

• The study compares anomaly returns before and after publication in the United States and international equity markets.
• US anomaly returns decline after publication, while the review reports no similar broad pattern internationally.
• The US and international difference remains after risk adjustment and matching anomalies by prior performance.
• Higher estimated arbitrage costs are associated with stronger anomaly returns, supporting a mispricing interpretation.
• Historical cross-market findings do not establish the future performance of an individual factor.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.