Anomalies in Finance

In finance, anomalies are patterns or events that contradict established financial theories, such as the Efficient Market Hypothesis, which suggests markets quickly incorporate all available information. Examples include the January effect, where stocks tend to perform better in January, or momentum anomalies, where stocks that have recently risen continue to rise. These irregularities suggest opportunities for abnormal profits but are often subject to debate about their causes and consistency. Anomalies highlight that markets may not always operate perfectly, influenced by investor behavior, market psychology, and other factors beyond purely rational decision-making.