“Does Academic Research Destroy Stock Return Predictability?”, 2016-02-01 (; similar):
We study the out-of-sample and post-publication return predictability of 97 variables shown to predict cross-sectional stock returns.
Portfolio returns are 26% lower out-of-sample and 58% lower post-publication. The out-of-sample decline is an upper bound estimate of data mining effects. We estimate a 32% (58%–26%) lower return from publication-informed trading.
Post-publication declines are greater for predictors with higher in-sample returns, and returns are higher for portfolios concentrated in stocks with high idiosyncratic risk and low liquidity. Predictor portfolios exhibit post-publication increases in correlations with other published-predictor portfolios.
Our findings suggest that investors learn about mispricing from academic publications.