Abstract

We show that stock returns follow predictable patterns before the publication of anomaly trading signals. Moreover, anomaly trading signals derived from financial data are themselves predictable, making it possible to trade before financial statements are released. A trading strategy based on predicted signals earns an annualized return of 3.65% in the quarter before the signal is released. In recent periods this predictability is concentrated in signals that are harder to forecast and returns are increasingly earned several quarters before signals are released. Our findings suggest anomalies are more anomalous than previously recognized.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.  

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• Keyword(s):
• finance 265