000			02913cam a22003857 4500
001			w26493
003			NBER
005			20211020103936.0
006			m o d
007			cr cnu||||||||
008			210910s2019 mau fo 000 0 eng d
100	1		_aChinco, Alexander M.
245	1	0	_aEstimating The Anomaly Base Rate / _cAlexander M. Chinco, Andreas Neuhierl, Michael Weber.
260			_aCambridge, Mass. _bNational Bureau of Economic Research _c2019.
300			_a1 online resource: _billustrations (black and white);
490	1		_aNBER working paper series _vno. w26493
500			_aNovember 2019.
520	3		_aThe academic literature literally contains hundreds of variables that seem to predict the cross-section of expected returns. This so-called "anomaly zoo" has caused many to question whether researchers are using the right tests of statistical significance. But, here's the thing: even if researchers use the right tests, they will still draw the wrong conclusions from their econometric analyses if they start out with the wrong priors---i.e., if they start out with incorrect beliefs about the ex ante probability of encountering a tradable anomaly.
520	3		_aSo, what are the right priors? What is the correct anomaly base rate?
520	3		_aWe develop a first way to estimate the anomaly base rate by combining two key insights: 1) Empirical-Bayes methods capture the implicit process by which researchers form priors based on their past experience with other variables in the anomaly zoo. 2) Under certain conditions, there is a one-to-one mapping between these prior beliefs and the best-fit tuning parameter in a penalized regression. We study trading-strategy performance to verify our estimation results. If you trade on two variables with similar one-month-ahead return forecasts in different anomaly-base-rate regimes (low vs. high), the variable in the low base-rate regime consistently underperforms the otherwise identical variable in the high base-rate regime.
530			_aHardcopy version available to institutional subscribers
538			_aSystem requirements: Adobe [Acrobat] Reader required for PDF files.
538			_aMode of access: World Wide Web.
588	0		_aPrint version record
690		7	_aC12 - Hypothesis Testing: General _2Journal of Economic Literature class.
690		7	_aC52 - Model Evaluation, Validation, and Selection _2Journal of Economic Literature class.
690		7	_aG11 - Portfolio Choice • Investment Decisions _2Journal of Economic Literature class.
700	1		_aNeuhierl, Andreas.
700	1		_aWeber, Michael.
710	2		_aNational Bureau of Economic Research.
830		0	_aWorking Paper Series (National Bureau of Economic Research) _vno. w26493.
856	4	0	_uhttps://www.nber.org/papers/w26493
856			_yAcceso en línea al DOI _uhttp://dx.doi.org/10.3386/w26493
942			_2ddc _cW-PAPER
999			_c321630 _d280192