NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Real Anomalies

Jules H. van Binsbergen, Christian C. Opp

NBER Working Paper No. 23238
Issued in March 2017
NBER Program(s):Asset Pricing

We examine the importance of asset pricing anomalies (alphas) for the real economy. We develop a novel quantitative model with lumpy investment that features such informational inefficiencies and yields closed-form solutions for cross-sectional distributions of firm dynamics. Our findings indicate that anomalies can cause material real inefficiencies, raising the possibility that agents that help eliminate them can provide significant value added to the economy. The framework reveals that alphas alone are poor indicators of real distortions, and that efficiency losses depend on the persistence of alphas, the amount of mispriced capital, and the Tobin's q of firms affected.

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Document Object Identifier (DOI): 10.3386/w23238

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