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Accounting anomalies and fundamental analysis: An alternative view

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  • Lewellen, Jonathan
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    Abstract

    The literature on accounting anomalies and fundamental analysis provides important insights into the behavior of stock prices and the relation between accounting numbers and firm value. My review discusses five key topics from this literature: (1) discriminating between risk and mispricing explanations for return anomalies; (2) estimating the implied cost of capital; (3) inferring investors' perceptions of the earnings process; (4) understanding the importance of trading costs and firm size; and (5) improving the construction of characteristic-based trading strategies. My discussion highlights important challenges facing the literature and offers suggestions for improving empirical tests.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 50 (2010)
    Issue (Month): 2-3 (December)
    Pages: 455-466

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    Handle: RePEc:eee:jaecon:v:50:y:2010:i:2-3:p:455-466

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    Web page: http://www.elsevier.com/locate/jae

    Related research

    Keywords: Accounting anomalies Mispricing Cost of capital Mishkin tests Earnings and returns;

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