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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2014
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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 |
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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? |
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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. |
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text |
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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? |
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Institutional Knowledge at Singapore Management University |
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2014 |
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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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