Stock Return Anomaly Evaluation Tools

How can researchers assess the true value and robustness of new stock return anomalies (predictors) in consideration for addition to the factor zoo? In their January 2023 paper entitled “Assaying Anomalies”, Robert Novy-Marx and Mihail Velikov present a protocol/tool set for dissecting and understanding newly proposed cross-sectional stock return predictors. The tools address the most important issues involved in testing asset pricing strategies, including some machine learning techniques. They pay particular attention to implementation costs that prevent exploitation of predictors with good gross returns (as with high turnover and/or overweighting small stocks). The tool set, including automated report generator, is available as a free web application and a public github repository. Key aspects of reports generated by this tool set are:

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