Time-series and cross-sectional momentum in anomaly returns |
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Authors: | Feifei Wang Xuemin |
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Institution: | 1. Farmer School of Business, Miami University, Oxford, Ohio, USA;2. College of Business, Lehigh University, Bethlehem, Pennsylvania, USA;3. School of Business, Renmin University of China, Beijing, China |
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Abstract: | We find strong evidence of time-series and cross-sectional momentum in the long–short returns of a comprehensive sample of anomalies. Strategies that exploit such persistence deliver significant abnormal returns that are robust to the stock momentum effect, cannot be explained by traditional asset-pricing models, and are more pronounced when arbitrage capital is scarcer or market liquidity is lower. Momentum in anomaly returns dissipates but does not reverse, in the long-run. Our findings are consistent with limits-to-arbitrage and slow-moving capital causing mispricing to persist. Supporting this explanation, we find that both the level and persistence of anomaly returns are positively related to idiosyncratic volatility. |
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Keywords: | anomalies idiosyncratic volatility limits to arbitrage momentum |
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