Keywords

anomalies, asset pricing, information economics, return predictability

Abstract

We show that stock returns exhibit predictable patterns before the publication of anomaly trading signals. Moreover, anomaly trading signals derived from financial data are themselves predictable, making it possible to trade before financial statements are released. A trading strategy based on predicted anomaly signals earns an annualized return of 2.80% in the quarter before the signal is released. In recent periods, this return predictability is concentrated in signals that are harder to forecast, and returns are increasingly earned several quarters before signals are released. Our findings suggest anomalies are more anomalous than previously recognized.

Original Publication Citation

“Predicting Anomalies” (with Boone Bowles, Adam Reed, and Matt Ringgenberg).