Anomalies in Stock Market Pricing: Problems in Return Measurements
AbstractWe study four asset pricing anomalies: market size, contrarian, momentum, and book-to-market premia. We first control for two biases. We control for delisting effects, which create a survivorship bias. We then control for microstructure distortions from the bid-ask spread bounce, which upwardly biases returns when the bid-ask spreads are large. We find that these two biases account for a substantial portion of the market size, contrarian, and book-to-market anomalies. While these bias effects are substantial, they do not invalidate the anomalies. Controlling for bias, the momentum premium strengthens.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 79 (2006)
Issue (Month): 5 (September)
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Web page: http://www.journals.uchicago.edu/JB/
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