Market Anomalies: Calendar Effects, Size, Value, and Momentum

1. Anomalies define the landscape of factor risk premia and potential alpha sources.
2. Whether each anomaly is a risk premium (rational pricing) or a mispricing (behavioural) determines whether it is a persistent edge or alpha that will decay as more capital chases it.
3. The joint hypothesis problem (any anomaly could be either a model failure or a genuine inefficiency) means no test is definitive — each anomaly requires a judgement call.

This note surveys the main anomalies in four categories: calendar effects, return predictability from past prices, firm characteristic effects, and event studies (semi-strong form tests). For each, it covers the evidence, the leading explanations, and the practical implications for a quantitative fund.

• describe the January effect and the day-of-week effect with specific empirical magnitudes;
• summarise the evidence from serial correlation, runs tests, and filter rules on weak-form efficiency;
• explain the size effect, book-to-market effect, and earnings/price effect and their relationship;
• describe the event study methodology and what semi-strong form efficiency implies about cumulative abnormal returns;
• state at least five candidate explanations for why a firm-characteristic anomaly might persist.

1. 1. Calendar effects
2. 1. Return predictability from past prices
3. 1. Firm characteristic effects
4. 1. Event studies and semi-strong form efficiency