What Is a Market Anomaly?

Market anomalies can be divided into calendar anomalies, event anomalies, company anomalies, and accounting anomalies. A major challenge to efficient market theory comes from unexplained market anomalies, which indicates that markets are ineffective. Anomalies can exist in any form of efficient market, but more often they appear in semi-strong markets.

Market anomalies

Right!

Market anomalies can be divided into calendar anomalies, event anomalies, company anomalies, and accounting anomalies. A major challenge to efficient market theory comes from unexplained market anomalies, which indicates that markets are ineffective. Anomalies can exist in any form of efficient market, but more often they appear in semi-strong markets.

(A) calendar abnormal

Calendar anomalies are a type of anomalies related to time factors. For example, weekend abnormalities: securities prices tend to rise on Friday, and tend to decline on Monday; holiday anomalies: abnormal returns on the last trading day before a holiday, etc.

(Two) the event is abnormal

Event anomalies are anomalies related to specific events. For example, analysts recommend: The more analysts recommend to buy a certain stock, the more likely that stock is to fall; Selected constituents: Stocks are selected to constituents, causing the stock to rise, etc.

(Three) the company is abnormal

Corporate anomalies are anomalies caused by the company itself or investors' degree of identification with the company. For example, the effect of small companies: small companies usually have higher returns than large companies; closed-end funds: discounted closed-end funds have higher returns; neglected stocks: stocks that are not favored by analysts often produce high returns; Institutional holdings: Shares held by a small number of institutions tend to yield high returns.

(IV) Accounting abnormalities

Accounting abnormality refers to the abnormal phenomenon of stock price changes that occurs after the release of accounting information. For example, the unexpected effect of earnings: stocks with actual surpluses greater than the expected earnings will still rise in price after the announcement of the earnings; P / B effect: the earnings of companies with low P / B ratios are often lower than those of high P / B companies; Lower stocks tend to have higher yields.