Market anomaly

From Wikipedia, the free encyclopedia

A market anomaly (or inefficiency) is a price and/or return distortion on a financial market.

It is usually related to:

• either structural factors (unfair competition, lack of market transparency, ...)
• or behavioral biases by economic agents (see behavioral economics)

It sometimes refers to phenomena contradicting the efficient market hypothesis. There are anomalies in relation to the economic fundamentals of the equity, technical trading rules, and economic calendar events.

Anomalies could be Fundamental, Technical or calendar related. Fundamental anomalies include value effect and small-cap effect (low P/E stocks and small cap companies do better than index on an average. Calendar anomalies involve patterns in stock returns from year to year or month to month, while technical anomalies include momentum effect. Some further information is available at http://www.investorhome.com/anomaly.htm

See also efficient market