Cam Harvey, past editor of the Journal of Finance, with co-authors Yan Liu and Heqing Zhu, studied 315 factors from top journal articles and highly regarded working papers. Adjusting for “data-snooping,” Harvey, Liu, and Zhu (2014) conclude that only a handful of the factors in the zoo are actually statistically significant. Using this adjustment technique, our old friends the value, low volatility, and momentum anomalies are very significant; well-understood risk factors like market and illiquidity are significant; and small-cap is insignificant, as are many of the newer and more exotic factors (such as idiosyncratic volatility and various definitions of quality5 like default risk, ROE, and ROI).
So far, many of the re-examinations of equity factors have used U.S. data exclusively. Our research on factors used both U.S. and non-U.S. data to examine robustness. Our results corroborate what others have concluded using U.S. data. In Table 2, we find that value and low beta are two anomalies which also work in Europe and Japan, while small-cap and other factors such as ROE, profitability, etc., do not work outside the United States. This finding argues for the likelihood that many popular factors are more artifacts of U.S. data than real sources of return premia. Again, we find value, low beta, and momentum to be robust... and we find other factors show significantly less robustness.