NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Replicating Anomalies

Kewei Hou, Chen Xue, Lu Zhang

NBER Working Paper No. 23394
Issued in May 2017
NBER Program(s):Asset Pricing, Corporate Finance, Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

The anomalies literature is infested with widespread p-hacking. We replicate the entire anomalies literature in finance and accounting by compiling a largest-to-date data library that contains 447 anomaly variables. With microcaps alleviated via New York Stock Exchange breakpoints and value-weighted returns, 286 anomalies (64%) including 95 out of 102 liquidity variables (93%) are insignificant at the conventional 5% level. Imposing the cutoff t-value of three raises the number of insignificance to 380 (85%). Even for the 161 significant anomalies, their magnitudes are often much lower than originally reported. Out of the 161, the q-factor model leaves 115 alphas insignificant (150 with t < 3). In all, capital markets are more efficient than previously recognized.

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Document Object Identifier (DOI): 10.3386/w23394

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