Anomalies in Stock Market Pricing: Problems in Return Measurements

We study four asset pricing anomalies: market size, contrarian, momentum, and book-to-market premia. We first control for two biases. We control for delisting effects, which create a survivorship bias. We then control for microstructure distortions from the bid-ask spread bounce, which upwardly biases returns when the bid-ask spreads are large. We find that these two biases account for a substantial portion of the market size, contrarian, and book-to-market anomalies. While these bias effects are substantial, they do not invalidate the anomalies. Controlling for bias, the momentum premium strengthens.