Information in Balance Sheets about Future Stock Returns: Evidence from Net Operating Assets
AbstractThis paper, builds on the work of Hirshleifer, Hou, Teoh and Zhang (Journal of Accounting and Economics, 38, 2004) on the NOA (net operating assets) anomaly. After controlling for current profitability, we find a strong negative relation of NOA with future stock returns. Moreover, the results indicate that this relation is driven from the asset side of NOA. We also find, that the hedge strategies on NOA and operating assets generate positive abnormal returns and constitute statistical arbitrage opportunities. Overall, our evidence on the sources of the NOA anomaly, suggests that it requires accounting distortions arising from earnings management.
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Bibliographic InfoPaper provided by University of Peloponnese, Department of Economics in its series Working Papers with number 0009.
Length: 40 pages
Date of creation: 2007
Date of revision:
Net operating assets (NOA); stock returns; earnings management; growth.;
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