Exploring Unexplained Market Phenomena: A Deep Dive into Financial Anomalies and Puzzles

Unraveling Market Mysteries: A Comprehensive Review of Financial Anomalies and Puzzles

Abstract

This comprehensive literature review assembles various market anomalies and puzzles to provide a holistic perspective that challenges the traditional Efficient Market Hypothesis. Drawing insights from multiple academic works, we delve into long-term return irregularities, earnings management's impact on equity offerings, and information asymmetry’s influence on stock returns.

The review encompasses unique phenomena such as persistent mutual fund performance, day-of-the-week effects in market returns, the January anomaly, weather-induced mood shifts affecting financial markets, and other anomalies that defy conventional wisdom. We also explore international asset pricing dynamics alongside week effects, with a spotlight on cryptocurrency efficiency.

Incorporating behavioral finance concepts, we examine social transmission bias, emotional drivers of investment decisions, biased investor beliefs, market optimism, sentiment analysis, and global inefficiencies in the financial markets. The influence of unique events like sports game outcomes Super Bowl effect, seasonal factors including daylight saving time changes, and the Halloween anomaly are analyzed for their impact on market behavior.

The review concludes by highlighting the dynamic landscape of market anomalies, discussing recent advancements in using to study these phenomena, addressing challenges related to investor psychology, and observing how once prominent anomalies like those affecting country and industry returns have seemingly diminished. It suggests future research directions focusing on utilizing diverse data sources, comprehensive theoretical frameworks, and considerations for technological evolution, regulatory changes, and environmental impacts on market dynamics.

Keywords: Market Anomalies, Efficient Market Hypothesis, Long-term Returns, Earnings Management, Information Uncertnty, Post-Merger Performance, Mutual Funds, Day-of-the-Week Effects, January Anomaly

JEL Classification: G00

References Sample

1. A Agrawal, J Jaffe, G Mandelker. The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly. The Journal of Finance, Vol. 47, Issue 4, pp. 1605-1621 1992.

2. N Aktas, E De Bodt, F Declerck, H Van Oppens. The PIN anomaly around MA announcements. Journal of Financial Markets, Vol. 10, Issue 2, pp. 169-191 2007.

Acknowledgments

This research has been supported by the Bern Business School and acknowledges contributions from colleagues at University of Twente.

Citations

To cite this paper:

Osterrieder, J., Seigne, M. 2023. Unraveling market mysteries: A comprehensive review of financial anomalies and puzzles. Open Research Europe, Vol. 3, pp. 172.

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