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Where have the profits gone? Market efficiency and the disappearing equity anomalies in country and industry returns

Zaremba, Adam; Umutlu, Mehmet; Maydybura, Alina


Adam Zaremba

Alina Maydybura


We are the first to demonstrate the decline in the cross-sectional predictability of country and industry returns in recent years. We examine 53 anomalies in country and industry indices from 64 markets for the years 1973–2018. The profitability of the strategies has significantly decreased recently, driven particularly by the disappearance of value and reversal effects. The phenomenon is strongest in large developed markets. Neither changes in country- and industry-specific risks, nor investor learning from the academic literature can explain the effect. Our findings support the view that the fall in return predictability is caused by the overall improvement in market efficiency.

Journal Article Type Article
Acceptance Date Sep 28, 2020
Online Publication Date Sep 30, 2020
Publication Date 2020-12
Deposit Date Jan 29, 2023
Journal Journal of Banking & Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 121
Article Number 105966