Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?

We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the majority of the anomalies have attenuated and the average returns from a portfolio strategy based on promi...

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Main Authors: CHORDIA, Tarun, SUBRAHMANYAM, Avanidhar, tONG, Qing
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2014
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/4735
https://ink.library.smu.edu.sg/context/lkcsb_research/article/5734/viewcontent/CapitalMktAnomaliesHighLiqTradingAct_2014.pdf
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spelling sg-smu-ink.lkcsb_research-57342017-06-12T07:06:05Z Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity? CHORDIA, Tarun SUBRAHMANYAM, Avanidhar tONG, Qing We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the majority of the anomalies have attenuated and the average returns from a portfolio strategy based on prominent anomalies have approximately halved after decimalization. We provide evidence that hedge fund assets under management, short interest and aggregate share turnover have led to the decline in anomaly-based trading strategy profits in recent years. Overall, our work indicates that policies to stimulate liquidity and ameliorate trading costs improve capital market efficiency. 2014-08-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/4735 info:doi/10.1016/j.jacceco.2014.06.001 https://ink.library.smu.edu.sg/context/lkcsb_research/article/5734/viewcontent/CapitalMktAnomaliesHighLiqTradingAct_2014.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Cross-section of stock returns Anomalies Market efficiency Business Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Cross-section of stock returns
Anomalies
Market efficiency
Business
Finance and Financial Management
spellingShingle Cross-section of stock returns
Anomalies
Market efficiency
Business
Finance and Financial Management
CHORDIA, Tarun
SUBRAHMANYAM, Avanidhar
tONG, Qing
Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?
description We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the majority of the anomalies have attenuated and the average returns from a portfolio strategy based on prominent anomalies have approximately halved after decimalization. We provide evidence that hedge fund assets under management, short interest and aggregate share turnover have led to the decline in anomaly-based trading strategy profits in recent years. Overall, our work indicates that policies to stimulate liquidity and ameliorate trading costs improve capital market efficiency.
format text
author CHORDIA, Tarun
SUBRAHMANYAM, Avanidhar
tONG, Qing
author_facet CHORDIA, Tarun
SUBRAHMANYAM, Avanidhar
tONG, Qing
author_sort CHORDIA, Tarun
title Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?
title_short Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?
title_full Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?
title_fullStr Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?
title_full_unstemmed Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity?
title_sort have capital market anomalies attenuated in the recent era of high liquidity and trading activity?
publisher Institutional Knowledge at Singapore Management University
publishDate 2014
url https://ink.library.smu.edu.sg/lkcsb_research/4735
https://ink.library.smu.edu.sg/context/lkcsb_research/article/5734/viewcontent/CapitalMktAnomaliesHighLiqTradingAct_2014.pdf
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