Dynamic Asset (Mis)Pricing: Build-up vs. Resolution Anomalies

69 Pages Posted: 18 Feb 2021 Last revised: 25 Jun 2021

See all articles by Jules H. van Binsbergen

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Martijn Boons

Tilburg University

Christian C. Opp

University of Rochester - Simon Business School; National Bureau of Economic Research (NBER)

Andrea Tamoni

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Multiple version iconThere are 2 versions of this paper

Date Written: February 12, 2021

Abstract

We classify asset pricing anomalies into those that exacerbate mispricing (build-up anomalies) and those that resolve it (resolution anomalies). To this end, we estimate the dynamics of price wedges for a large number of well-known anomaly portfolios in the factor zoo and map them to firm-level mispricings. We find that several prominent anomalies like momentum and profitability further dislocate prices. While mispricing buildup is often quick, the subsequent resolution tends to be slow, suggesting the potential for material real economic consequences. Our results suggest that financial intermediaries chasing build-up anomalies in fact negatively affect price efficiency and associated real capital allocation.

Keywords: Dynamic Price Wedges, Build-up, Resolution, Alphas, Persistence

JEL Classification: G11, G12, G14

Suggested Citation

van Binsbergen, Jules H. and Boons, Martijn and Opp, Christian C. and Tamoni, Andrea, Dynamic Asset (Mis)Pricing: Build-up vs. Resolution Anomalies (February 12, 2021). Available at SSRN: https://ssrn.com/abstract=3785040 or http://dx.doi.org/10.2139/ssrn.3785040

Jules H. Van Binsbergen (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen

Martijn Boons

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Christian C. Opp

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrea Tamoni

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
438
Abstract Views
1,815
rank
86,796
PlumX Metrics