Philosophy

Capital asset pricing model

Consumption-based capital asset pricing model

Microeconomics

Stochastic discount factor

Dynamic pricing

Futures contract

Economics

Computer science

Anomaly (physics)

Resolution (logic)

Business

Price discovery

Physics

Politics

Political science

Monetary economics

Epistemology

Profitability index

Econometrics

Condensed matter physics

Artificial intelligence

Financial economics

Finance

Investment (military)

Explanatory power

Journal of Financial Economics

We classify asset pricing anomalies into those exacerbating mispricing (build-up anomalies) and those resolving it (resolution anomalies). We estimate the dynamics of price wedges for well-known anomaly portfolios and map them to firm-level mispricings. We find that several prominent anomalies like momentum and profitability further dislocate prices. Multi-factor models designed to eliminate one-month alphas still produce large price wedges. Our estimates yield a novel decomposition of Tobin's q, revealing that q's mispricing component has substantial explanatory power for firm investment. Overall, our results suggest that financial intermediaries chasing build-up anomalies negatively affect price efficiency and associated real capital allocation.

Dynamic asset (mis)pricing: Build-up versus resolution anomalies