TY  - JOUR
AU  - Wu,Jin Ginger
AU  - Zhang,Lu
TI  - Does Risk Explain Anomalies? Evidence from Expected Return Estimates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15950
PY  - 2010
Y2  - April 2010
UR  - http://www.nber.org/papers/w15950
L1  - http://www.nber.org/papers/w15950.pdf
N1  - Author contact info:
Jin Ginger Wu
443 Brooks Hall
Terry College of Business
University of Georgia
Athens, GA 30602
E-Mail: jinw@terry.uga.edu

Lu Zhang
Fisher College of Business
The Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 585-267-6250
E-Mail: zhanglu@fisher.osu.edu
AB  - We construct accounting-based costs of equity for dollar neutral long-short trading strategies formed on a comprehensive list of anomaly variables. These variables include book-to-market, size, composite issuance, net stock issues, abnormal investment, asset growth, investment-to-assets, accruals, earnings surprises, failure probability, return on assets, and short-term prior returns. Our findings are striking. Except for the value premium, cost of equity estimates differ dramatically from average realized returns. If accounting-based costs of equity are reasonable proxies for expected returns, the evidence implies that returns of most anomalies are unexpected, and that mispricing, not risk, is the main driving force of capital markets anomalies.
ER  -