Short Arbitrage, Return Asymmetry, and the Accrual Anomaly
نویسندگان
چکیده
منابع مشابه
Understanding the Accrual Anomaly
Interpreting accruals as working capital investment, we hypothesize that firms optimally adjust their capital investment in response to discount rate changes. Consistent with the discount-rate hypothesis, we document that (i) the predictive power of accruals for future returns increases with the correlations of accruals with past and current stock returns; (ii) controlling for investment substa...
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Prior accounting research argues that diminishing marginal returns on new investments drive lower persistence of accruals relative to cash flows. Macroeconomic research documents that marginal profitability is counter-cyclical, which implies that diminishing marginal returns on new investments are more pronounced during periods of expansions than recessions. Linking the cyclicality of diminishi...
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We investigate whether the accruals anomaly (Sloan 1996), characterized by U.S. stock prices over-weighting the role of accrual persistence and under-weighting the role of operating cash flow persistence for future earnings, is a local manifestation of a global phenomenon. Hence, we examine whether stock prices in six other major capital markets and Japan) fully reflect the implications of the ...
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Motivated by the findings that the aggregate (discretionary) accruals positively predicts oneyear-ahead firm-level stock returns and that there is a considerable amount of co-movement in firm-level (discretionary) accruals, we decompose firm-level (discretionary) accruals into a market-wide component and a firm-specific component. We document robust evidence that the two orthogonal (discretiona...
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W document considerable return comovement associated with accruals after controlling for other common factors. An accrual-based factor-mimicking portfolio has a Sharpe ratio of 0.16, higher than that of the market factor or the SMB and HML factors of Fama and French. According to rational frictionless asset pricing models, the ability of accruals to predict returns should come from the loadings...
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ژورنال
عنوان ژورنال: Review of Financial Studies
سال: 2011
ISSN: 0893-9454,1465-7368
DOI: 10.1093/rfs/hhr012