ABSTRACT
Emerging markets are thought to be a cornucopia of equity anomalies. Yet while markets mature, by learning, investors raise the level of market efficiency, diminishing the profitability of the existing patterns. Taking the Polish stock market as an example, we offer a viable solution to this tendency – an active asset allocation strategy based on the momentum effect. First, we identify and replicate 100 anomalies in the cross-section of returns. Then, having documented the momentum in their performance, we translate it into a profitable strategy. Going long (short) on the anomalies that performed best (worst) in the past produces significant raw and risk-adjusted returns outperforming a naive benchmark of equal weights of all profitable anomalies. The results are robust to various considerations.
