A Taxonomy of Anomalies and Their Trading Costs
We study the after-trading-cost performance of anomalies and the effectiveness of transaction cost mitigation techniques. Introducing a buy/hold spread, with more stringent requirements for establishing positions than for maintaining them, is the most effective cost mitigation technique. Most anomal...
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| Veröffentlicht in: | The Review of financial studies 2016-01, Vol.29 (1), p.104-147 |
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| container_end_page | 147 |
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| container_title | The Review of financial studies |
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| creator | Novy-Marx, Robert Velikov, Mihail |
| description | We study the after-trading-cost performance of anomalies and the effectiveness of transaction cost mitigation techniques. Introducing a buy/hold spread, with more stringent requirements for establishing positions than for maintaining them, is the most effective cost mitigation technique. Most anomalies with less than 50% turnover per month generate significant net spreads when designed to mitigate transaction costs; few with higher turnover do. The extent to which new capital reduces strategy profitability is inversely related to turnover, and strategies based on size, value, and profitability have the greatest capacity to support new capital. Transaction costs always reduce strategy profitability, increasing data-snooping concerns. |
| doi_str_mv | 10.1093/rfs/hhv063 |
| format | Article |
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| ispartof | The Review of financial studies, 2016-01, Vol.29 (1), p.104-147 |
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| language | eng |
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| source | EBSCOhost Business Source Complete; JSTOR Archive Collection A-Z Listing; Oxford University Press Journals All Titles (1996-Current) |
| subjects | Cost estimates Costs Effectiveness studies Financial portfolios Investors Market capitalization Price momentum Profitability Securities trading Special Section: Meta-Analysis of Market Anomalies Spread Stock exchanges Stock prices Stock transactions Trade Transaction costs |
| title | A Taxonomy of Anomalies and Their Trading Costs |
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