Stats › Backtesting et preuves › Anomaly decay
Published anomalies lose 58% after publication, and data mined signals that were never published lose almost as much
Mean monthly long short returns for 97 cross-sectional predictors from 80 studies, by regime. The decline is minus 0.150 with a standard error of 0.077 out of sample and minus 0.337 with a standard error of 0.090 after publication. The middle bar is the in-sample mean plus the out-of-sample coefficient; the source prints the coefficients, not that level.
Returns to published predictors fall 26% out of sample and 58% after publication. But mechanically data mined signals, which nobody published and nobody traded, retain 51% against published predictors' 53%. Most of the decay is not about publication.
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