PlumX Metrics
SSRN
Embed PlumX Metrics

Investing in Stock Market Anomalies

SSRN Electronic Journal
2012
  • 3
    Citations
  • 3,551
    Usage
  • 31
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    3
    • Citation Indexes
      3
  • Usage
    3,551
    • Abstract Views
      3,139
    • Downloads
      412
  • Captures
    31
    • Readers
      30
    • Exports-Saves
      1
      • SSRN
        1
  • Ratings
    • Download Rank
      143,388

Article Description

For the last three decades, one of the most extensively investigated topics in financial economics is the crosssectional variation in stock returns. There are certain patterns in equity portfolios that are considered as anomalies because they cannot be explained by well-known asset pricing models. Each year billions of dollars are invested in portfolios based on anomalies which identify undervalued assets with high expected returns and overvalued assets with low expected returns. However, classical selection rules in financial economics fail to explain this investment behavior. This paper utilizes the almost dominance rules to examine the practice of investing in stock market anomalies. The results indicate that popular investment choices such as value and small stocks do not dominate growth and big stocks, whereas, the short-term reversal and momentum strategies create efficient investment alternatives. The relative strength of undervalued assets becomes more prevalent when the time-varying conditional distributions and broader portfolio comparisons are examined. Hence, the paper solves the wide inconsistency between the common practice in mutual and hedge funds’ asset allocation decision and modern portfolio theory by providing an explanation of investing in an expected utility paradigm.

Bibliographic Details

Turan G. Bali; Stephen J. Brown; K. Ozgur Demirtas

Elsevier BV

Mutual funds; equity portfolios; expected utility paradigm; stock market anomalies

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know