Working Paper: NBER ID: w23809
Authors: Xiaomeng Lu; Robert F. Stambaugh; Yu Yuan
Abstract: A pre-specified set of nine prominent U.S. equity return anomalies produce significant alphas in Canada, France, Germany, Japan, and the U.K. All of the anomalies are consistently significant across these five countries, whose developed stock markets afford the most extensive data. The anomalies remain significant even in a test that assumes their true alphas equal zero in the U.S. Consistent with the view that anomalies reflect mispricing, idiosyncratic volatility exhibits a strong negative relation to return among stocks that the anomalies collectively identify as overpriced, similar to results in the U.S.
Keywords: equity return anomalies; abnormal returns; idiosyncratic volatility; mispricing
JEL Codes: G11; G12; G14; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US equity return anomalies (G12) | abnormal returns in Canada (N22) |
| US equity return anomalies (G12) | abnormal returns in France (G19) |
| US equity return anomalies (G12) | abnormal returns in Germany (G12) |
| US equity return anomalies (G12) | abnormal returns in Japan (G19) |
| US equity return anomalies (G12) | abnormal returns in the UK (G12) |
| idiosyncratic volatility (IVOL) (C26) | alpha among overpriced stocks (G19) |
| US equity return anomalies (G12) | mispricing (D49) |