Question: 6. Please explain carefully different definitions of quality anomaly. Please explain data- snooping. How might you prove that quality is a true anomaly instead

6. Please explain carefully different definitions of quality anomaly. Please explain data- snooping. How might you prove that quality is a true anomaly instead of a datamined result? 7. You are given stock returns for 350 stocks which have 40 years of monthly stock returns. You form a cap-weighted portfolio from these 350 stocks and back-test this portfolio against the S&P 500. You discover that this portfolio outperforms the S&P 500 by 9% per annum! How do you explain that? (Hint: you may have legit reasons whether this awesome outperformance is real or you may have made mistakes in backtest, which means that this awesome backtest result cannot be replicated in the real world.)

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Lets address the questions one by one Question 6 Different Definitions of Quality Anomaly Quality anomalies in finance refer to the phenomenon where stocks that are deemed to be of high quality tend t... View full answer

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