Have Capital Market Anomalies Worldwide Attenuated in the Recent Era of High Liquidity and Trading Activity?

Benjamin R. Auer and Horst Rottmann

No 7204, CESifo Working Paper Series from CESifo

Abstract: We revisit and extend the study by Chordia et al. (2014) which documents that, in recent years, increased liquidity has significantly decreased exploitable returns of capital market anomalies in the US. Using a novel international dataset of arbitrage portfolio returns for four well-known anomalies (size, value, momentum and beta) in 21 developed stock markets and more advanced statistical methodology (quantile regressions, Markov regime-switching models, panel estimation procedures), we arrive at two important findings. First, the US evidence in the above study is not fully robust. Second, while markets worldwide are characterised by positive trends in liquidity, there is no persuasive time-series and cross-sectional evidence for a negative link between anomalies in market returns and liquidity. Thus, this proxy of arbitrage activity does not appear to be a key factor in explaining the dynamics of anomalous returns.

Keywords: capital market anomalies; attenuation; liquidity; quantile regression; Markov regime-switching; panel analysis (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cfn and nep-fmk
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp7204.pdf (application/pdf)

Related works:
Journal Article: Have capital market anomalies worldwide attenuated in the recent era of high liquidity and trading activity? (2019)
Working Paper: Have capital market anomalies worldwide attenuated in the recent era of high liquidity and trading activity? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7204

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().