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Publication Bias and the Cross-Section of Stock Returns

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  • Andrew Y Chen
  • Tom Zimmermann
  • Jeffrey Pontiff

Abstract

We develop an estimator for publication bias-adjusted returns and apply it to 156 published long-short portfolios. Our adjustment uses only in-sample data and provides sharper inferences than out-of-sample tests. Bias-adjusted returns are only 12.3% smaller than in-sample returns with a standard error of 1.7 percentage points. The small bias comes from the dispersion of returns across predictors, which is too large to be explained by data-mined noise. The bias is much smaller than post-publication decay (p-value ¡.0001), suggesting mispricing is important. Our results offer a different perspective about recent papers that find most published predictors are likely false. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Andrew Y Chen & Tom Zimmermann & Jeffrey Pontiff, 2020. "Publication Bias and the Cross-Section of Stock Returns," Review of Asset Pricing Studies, Oxford University Press, vol. 10(2), pages 249-289.
  • Handle: RePEc:oup:rasset:v:10:y:2020:i:2:p:249-289.
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    File URL: http://hdl.handle.net/10.1093/rapstu/raz011
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    Cited by:

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    9. Jiří Witzany, 2021. "A Bayesian Approach to Measurement of Backtest Overfitting," Risks, MDPI, Open Access Journal, vol. 9(1), pages 1-22, January.
    10. Chen, Andrew Y. & Zimmermann, Tom, 2020. "Open source cross-sectional asset pricing," CFR Working Papers 20-04, University of Cologne, Centre for Financial Research (CFR).
    11. Andrew Y. Chen & Mihail Velikov, 2020. "Zeroing in on the Expected Returns of Anomalies," Finance and Economics Discussion Series 2020-039, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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    1. Meta-Analysis in Economics

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