“Asset Pricing Anomalies and Factor Trading: an Empirical Analysis on the Swedish Market”

Abstract

It is very important for investors to study the dynamics behind the movement of assets’ prices, for this reason there is a wide literature covering the topic relative to Asset Pricing. In this research I study six-teen innovative pricing anomalies to verify whether they are statistically significant and then able to predict returns. The analysis is carried out on the Stockholm Stock Exchange between 1995 and 2016 and half of the treated predictors appear to work efficiently, i.e. they are statistically significant at 5% level. Then, I used those findings to develop different Factor trading strategies; the outcomes lead to the conclusion that the significant return predictors, when applied to parametric portfolios, manage to beat the market even for high levels of transaction costs.