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Do short-sellers arbrtrage accrual-based return anomalies?

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Author Info
Hirshleifer, David
Teoh, Siew Hong
Yu, Jeff Jiewei

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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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Publisher 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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Related research
Keywords: Accruals; NOA; anomalies; arbitrage; short sales; market efficiency;

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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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. [Downloadable!]
    Other versions:
  2. Hirshleifer, David & Kewei Hou & Teoh, Siew Hong & Yinglei Zhang, 2004. "Do investors overvalue firms with bloated balance sheets?," Journal of Accounting and Economics, Elsevier, vol. 38(1), pages 297-331, December. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!] (restricted)
  4. Ekkehart Boehmer & Charles M. Jones & Xiaoyan Zhang, 2008. "Which Shorts Are Informed?," Journal of Finance, American Finance Association, vol. 63(2), pages 491-527, 04. [Downloadable!] (restricted)
  5. Siew Hong Teoh & T. J. Wong, 2002. "Why New Issues and High-Accrual Firms Underperform: The Role of Analysts' Credulity," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 15(3), pages 869-900.
  6. Asquith, Paul & Pathak, Parag A. & Ritter, Jay R., 2005. "Short interest, institutional ownership, and stock returns," Journal of Financial Economics, Elsevier, vol. 78(2), pages 243-276, November. [Downloadable!] (restricted)
  7. Ashiq Ali & Mark A. Trombley, 2006. "Short Sales Constraints and Momentum in Stock Returns," Journal of Business Finance & Accounting, Blackwell Publishing, vol. 33(3-4), pages 587-615. [Downloadable!] (restricted)
  8. Nagel, Stefan, 2005. "Short sales, institutional investors and the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 78(2), pages 277-309, November. [Downloadable!] (restricted)
  9. Mitchell A. Petersen, 2005. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," NBER Working Papers 11280, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Lauren Cohen & Karl B. Diether & Christopher J. Malloy, 2007. "Supply and Demand Shifts in the Shorting Market," Journal of Finance, American Finance Association, vol. 62(5), pages 2061-2096, October. [Downloadable!] (restricted)
  11. D'Avolio, Gene, 2002. "The market for borrowing stock," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 271-306. [Downloadable!] (restricted)
  12. 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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