Publication Bias and the Cross-Section of Stock Returns

RePEc Short ID: pch1244
ORCID iD: 0000-0003-1153-3905

Chen, Andrew Y.; Zimmermann, Tom

doi:10.17016/FEDS.2018.033

Working Paper

Publication Bias and the Cross-Section of Stock Returns

Abstract: We develop an estimator for publication bias and apply it to 156 hedge portfolios based on published cross-sectional return predictors. Publication bias adjusted returns are only 12% smaller than in-sample returns. The small bias comes from the dispersion of returns across predictors, which is too large to be accounted for by data-mined noise. Among predictors that can survive journal review, a low t-stat hurdle of 1.8 controls for multiple testing using statistics recommended by Harvey, Liu, and Zhu (2015). The estimated bias is too small to account for the deterioration in returns after publication, suggesting an important role for mispricing.

Keywords: Data mining; Mispricing; Publication bias; Stock return anomalies;

JEL Classification: G10; G12;

https://doi.org/10.17016/FEDS.2018.033