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Do short-sellers arbrtrage accrual-based return anomalies?

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

Abstract

We find a positive association between short-selling and accruals, and between short-selling and NOA, during 1988-2003. The accrual and NOA return anomalies are asymmetric. The absolute value of mean abnormal returns is larger for high-accrual firms than low-accrual firms on NASDAQ, but not on NYSE, and the abnormal return asymmetry is stronger among firms with low institutional holdings. For NOA, there is only limited evidence that the abnormal return asymmetry is stronger on NASDAQ than on NYSE. These findings indicate that there is short arbitrage of the accrual and NOA anomalies, but that short sale constraints limit the effectiveness of short arbitrage (especially among NASDAQ firms).

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5510.

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Date of creation: 15 Jun 2007
Date of revision: 27 Oct 2007
Handle: RePEc:pra:mprapa:5510

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

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  1. Owen A. Lamont & Richard H. Thaler, 2001. "Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs," NBER Working Papers 8302, National Bureau of Economic Research, Inc.
  2. 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.
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  12. Siew Hong Teoh & T. J. Wong, 2002. "Why New Issues and High-Accrual Firms Underperform: The Role of Analysts' Credulity," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 869-900.
  13. Duan, Ying & Hu, Gang & McLean, R. David, 2010. "Costly arbitrage and idiosyncratic risk: Evidence from short sellers," Journal of Financial Intermediation, Elsevier, vol. 19(4), pages 564-579, October.
  14. Daniel, Kent, et al, 1997. " Measuring Mutual Fund Performance with Characteristic-Based Benchmarks," Journal of Finance, American Finance Association, vol. 52(3), pages 1035-58, July.
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  17. Pontiff, Jeffrey, 1996. "Costly Arbitrage: Evidence from Closed-End Funds," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1135-51, November.
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