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Short Arbitrage, Return Asymmetry And The Accrual Anomaly

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  • Hirshleifer, David
  • Teoh, Siew Hong
  • Yu, Jeff Jiewei

Abstract

We find a positive association between short-selling and accruals during 1988-2003. Short arbitrage occurs primarily among firms in the top accrual decile, and firms with sufficiently high supply of loanable shares (proxied by institutional holdings). Consistent with limits to short arbitrage, there is an asymmetry between the up- and down- sides of the accrual anomaly. Asymmetry is only present on NASDAQ, and is significantly stronger among firms with low institutional holdings, low liquidity (turnover and size), and high residual volatility. Thus, there is short arbitrage of the accrual anomaly, but short sale constraints limit its effectiveness.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16487.

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Date of creation: 27 Jul 2009
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Handle: RePEc:pra:mprapa:16487

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Keywords: Accruals; anomalies; arbitrage; short sales; market efficiency;

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  1. Hou, Kewei & Hirshleifer, David & Teoh, Siew Hong, 2007. "The Accrual Anomaly: Risk or Mispricing?," MPRA Paper 5173, University Library of Munich, Germany.
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Cited by:
  1. Alejandro Balbás & Beatriz Balbás & Raquel Balbás, 2013. "On the inefficiency of Brownian motions and heavier tailed price processes," Business Economics Working Papers id-13-01, Universidad Carlos III, Instituto sobre Desarrollo Empresarial "Carmen Vidal Ballester".

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