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Anomalies and News

Author

Listed:
  • JOSEPH ENGELBERG
  • R. DAVID MCLEAN
  • JEFFREY PONTIFF

Abstract

Using a sample of 97 stock return anomalies, we find that anomaly returns are 50% higher on corporate news days and six times higher on earnings announcement days. These results could be explained by dynamic risk, mispricing due to biased expectations, or data mining. We develop and conduct several unique tests to differentiate between these three explanations. Our results are most consistent with the idea that anomaly returns are driven by biased expectations, which are at least partly corrected upon news arrival.

Suggested Citation

  • Joseph Engelberg & R. David Mclean & Jeffrey Pontiff, 2018. "Anomalies and News," Journal of Finance, American Finance Association, vol. 73(5), pages 1971-2001, October.
    • Handle: RePEc:bla:jfinan:v:73:y:2018:i:5:p:1971-2001
    DOI: 10.1111/jofi.12718
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