Erasmus Finance Seminars

Speaker(s)
Tarun Chordia (Emory University)
Date
Tuesday, 16 April 2013
Location
Rotterdam

We examine whether the recent regime of increased liquidity and trading volume is associated with attenuation of equity return anomalies. The profitabilities of several anomaly-based trading strategies have attenuated significantly over time, particularly in liquid NYSE/AMEX stocks, and virtually none have significantly accentuated. The profits from a composite strategy based on all of the anomalies show a strong downward trend. Hedge fund assets under management, short interest, and the post-decimalization decline in trading costs, are associated with declines in anomaly-based trading strategy profits in recent years, indicating that increased arbitrage activity may have led to this decline in anomaly-based trading strategy profits.