What you see is not what you get: The costs of trading market anomalies
Is there a gap between the profitability of a trading strategy on paper and that which is achieved in practice? We answer this question by developing a general technique to measure the real-world implementation costs of financial market anomalies. Our method extends Fama-MacBeth regressions to compa...
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| Veröffentlicht in: | Journal of financial economics 2020-08, Vol.137 (2), p.515-549 |
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| container_end_page | 549 |
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| container_issue | 2 |
| container_start_page | 515 |
| container_title | Journal of financial economics |
| container_volume | 137 |
| creator | Patton, Andrew J. Weller, Brian M. |
| description | Is there a gap between the profitability of a trading strategy on paper and that which is achieved in practice? We answer this question by developing a general technique to measure the real-world implementation costs of financial market anomalies. Our method extends Fama-MacBeth regressions to compare the on-paper returns to factor exposures with those achieved by mutual funds. Unlike existing approaches, ours delivers estimates of all-in implementation costs without relying on parametric microstructure models or explicitly specified factor trading strategies. After accounting for implementation costs, typical mutual funds earn low returns to value and no returns to momentum. |
| doi_str_mv | 10.1016/j.jfineco.2020.02.012 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0304-405X |
| ispartof | Journal of financial economics, 2020-08, Vol.137 (2), p.515-549 |
| issn | 0304-405X 1879-2774 |
| language | eng |
| recordid | cdi_proquest_journals_2441888229 |
| source | Elsevier ScienceDirect Journals |
| subjects | Financial market Implementation Market efficiency Mutual funds Performance evaluation Profitability Rates of return Regression analysis Securities trading Trading Trading costs |
| title | What you see is not what you get: The costs of trading market anomalies |
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