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Anomalies in Stock Market Pricing: Problems in Return Measurements

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  • Wentworth Boynton

    (University of New Haven)

  • Henry R. Oppenheimer

    (University of Rhode Island)

Abstract

We 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.

Suggested Citation

  • Wentworth Boynton & Henry R. Oppenheimer, 2006. "Anomalies in Stock Market Pricing: Problems in Return Measurements," The Journal of Business, University of Chicago Press, vol. 79(5), pages 2617-2632, September.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:5:p:2617-2632
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    File URL: http://dx.doi.org/10.1086/505246
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    Cited by:

    1. Martin Rohleder & Hendrik Scholz & Marco Wilkens, 2010. "Survivorship Bias and Mutual Fund Performance: Relevance, Significance, and Methodical Differences," Review of Finance, European Finance Association, vol. 15(2), pages 441-474.

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