A1492
Title: Dynamic asset (mis)pricing: Build-up vs. resolution anomalies
Authors: Jules Van Binsbergen - Wharton and NBER (United States) [presenting]
Abstract: Asset pricing anomalies are classified into those that exacerbate mispricing (build-up anomalies) and those that resolve them (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. The results suggest that financial intermediaries chasing build-up anomalies in fact negatively affect price efficiency and associated real capital allocation.
