Common bias for distorting the tests of mispricing

Measurement of abnormal return – not risk-adjusted

Strategy risk

Data mining – related to Type I error that the statistically significant relationships occur by chance in fact

Survivorship bias –some funds and companies that are ceased and dropped out of the performance histories lead to upward bias on returns

Sample selection bias – sample do not has the same characteristics as the population

Small sample bias – Inferences drawn from a small sample or short time period may be incorrect

Nonsynchronous trading – price date for stocks that trade infrequently can distort the tests