Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1003042 | Research in International Business and Finance | 2016 | 19 Pages |
•The study investigates the momentum effect in equity anomalies.•Taking Poland as an example, we identify and replicate 100 equity anomalies.•The anomalies deteriorate in performance over time.•There is strong persistence in returns on the equity anomalies.•Buying (selling short) the top (bottom) anomalies produces significant abnormal returns.
Emerging markets are thought to be a cornucopia of equity anomalies. Yet while markets mature, by learning investors raise the level of market efficiency diminishing the profitability of the existing patterns. Taking the Polish stock market as an example, we offer a viable solution to this tendency – an active asset allocation strategy based on the momentum effect. First, we identify and replicate 100 anomalies in the cross-section of returns. Then, having documented the momentum in their performance, we translate it into a profitable strategy. Going long (short) on the anomalies which performed best (worst) in the past produces significant raw and risk-adjusted returns outperforming a naive benchmark of equal weights of all profitable anomalies. The results are robust to various considerations.