Working Paper

The Limits of p-Hacking : A Thought Experiment


Abstract: Suppose that asset pricing factors are just p-hacked noise. How much p-hacking is required to produce the 300 factors documented by academics? I show that, if 10,000 academics generate 1 factor every minute, it takes 15 million years of p-hacking. This absurd conclusion comes from applying the p-hacking theory to published data. To fit the fat right tail of published t-stats, the p-hacking theory requires that the probability of publishing t-stats < 6.0 is infinitesimal. Thus it takes a ridiculous amount of p-hacking to publish a single t-stat. These results show that p-hacking alone cannot explain the factor zoo.

Keywords: Stock return anomalies; Multiple testing; p-hacking; Publication bias;

JEL Classification: G10; G12;

https://doi.org/10.17016/FEDS.2019.016

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2019-03-22

Number: 2019-016