Short Arbitrage, Return Asymmetry And The Accrual Anomaly

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Short Arbitrage, Return Asymmetry And The Accrual Anomaly

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Hirshleifer, David
Teoh, Siew Hong
Yu, Jeff Jiewei

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David Hirshleifer

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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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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G1 - Financial Economics - - General Financial Markets
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

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NEP-ALL-2009-08-02 (All new papers)

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Daniel, Kent & Titman, Sheridan, 1997. " Evidence on the Characteristics of Cross Sectional Variation in Stock Returns," Journal of Finance, American Finance Association, vol. 52(1), pages 1-33, March. [Downloadable!] (restricted)
Other versions:
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Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February. [Downloadable!] (restricted)
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Other versions:
- Hirshleifer, David & Hou, Kewei & Teoh, Siew Hong, 2006. "The Accrual Anomaly: Risk or Mispricing?," Working Paper Series 2006-3, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
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Other versions:
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Other versions:
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Other versions:
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Pontiff, Jeffrey, 1996. "Costly Arbitrage: Evidence from Closed-End Funds," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1135-51, November. [Downloadable!] (restricted)

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