U.S. Academic Research Extinguishing Global Stock Anomalies?

Does publication of academic studies on stock return anomalies in the U.S. tend to extinguish these anomalies in global markets? In their November 2023 paper entitled “Does U.S. Academic Research Destroy the Predictability of Global Stock Returns?”, Guohao Tang, Yuwei Xie and Lin Zhu compare out-of-sample (post-research sample) and post-publication global returns to research-sample global returns for 87 factors described in U.S. journals. The global sample includes 38 country markets (22 developed and 16 developing). The 87 factors include those based on momentum, value, investment, profitability, intangibles and trading frictions. For each factor each month, they reform a portfolio that is long (short) the fifth of stocks expected to have the highest (lowest) next-month returns. They weight stocks in each portfolio either equally or by market capitalization according to the approach used in the associated published paper. Using data required to compute monthly returns for 87 anomalies across 38 countries with research sample end dates after 2000 during January 1990 through December 2020, they find that: (more…)