Peter, An equity researcher working at BS hedge fund in New York, U.S., has developed a clever way of measuring operating efficiency (OE) of 100 companies in China. Using historical data, Peter forms 10 portfolios based on OE rankings, constructs a zero-cost portfolio (HML_OE), and finds spectacular $ average returns on HML_OE. Peter claims that HML_OE is a new anomaly, and wants to convince her hedge fund boss to invest into HML_OE. However, her boss is not yet convinced, and asks you to verify Peters claim.

Critically evaluate Peters claim on HML_OE.

Is this question related to CAPM or Uncovered Interest Parity or both? How should I answer this question? I have to write 1000 words.