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The Mishkin Test: An Analysis Of Model Extensions

Author

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  • Diana MURESAN

    (Babes-Bolyai University of Cluj-Napoca, Faculty of Economics and Business administration)

Abstract

This paper reviews empirical research that apply Mishkin test for the examination of the existence of accruals anomaly using alternative approaches. Mishkin test is a test used in macro-econometrics for rational hypothesis, which test for the market efficiency. Starting with Sloan (1996) the model has been applied to accruals anomaly literature. Since Sloan (1996), the model has known various improvements and it has been the subject to many debates in the literature regarding its efficacy. Nevertheless, the current evidence strengthens the pervasiveness of the model. The analyses realized on the extended studies on Mishkin test highlights that adding additional variables enhances the results, providing insightful information about the occurrence of accruals anomaly.

Suggested Citation

  • Diana MURESAN, 2015. "The Mishkin Test: An Analysis Of Model Extensions," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 7, pages 393-400, April.
  • Handle: RePEc:cmj:seapas:y:2015:i:7:p:393-400
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    References listed on IDEAS

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    1. Kothari, S.P. & Loutskina, E. & Nikolaev, V., 2006. "Agency Theory of Overvalued Equity as an Explanation for the Accrual Anomaly," Discussion Paper 2006-103, Tilburg University, Center for Economic Research.
    2. Frederic S. Mishkin, 1983. "A Rational Expectations Approach to Macroeconomics: Testing Policy Ineffectiveness and Efficient-Markets Models," NBER Books, National Bureau of Economic Research, Inc, number mish83-1, January.
    3. Jiang, Guohua, 2007. "Stock performance and the mispricing of accruals," The International Journal of Accounting, Elsevier, vol. 42(2), pages 153-170.
    4. Kothari, S. P. & Sabino, Jowell S. & Zach, Tzachi, 2005. "Implications of survival and data trimming for tests of market efficiency," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 129-161, February.
    5. Lewellen, Jonathan, 2010. "Accounting anomalies and fundamental analysis: An alternative view," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 455-466, December.
    6. Patricia M. Dechow & Scott A. Richardson & Richard G. Sloan, 2008. "The Persistence and Pricing of the Cash Component of Earnings," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 537-566, June.
    7. Christoph Kaserer & Carmen Klingler, 2008. "The Accrual Anomaly Under Different Accounting Standards - Lessons Learned from the German Experiment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(7-8), pages 837-859.
    8. 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.
    9. LaFond, Ryan, 2005. "Is the Accrual Anomaly a Global Anomaly?," Working papers 27856, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    10. Arthur Kraft & Andrew J. Leone & Charles E. Wasley, 2007. "Regression-Based Tests of the Market Pricing of Accounting Numbers: The Mishkin Test and Ordinary Least Squares," Journal of Accounting Research, Wiley Blackwell, vol. 45(5), pages 1081-1114, December.
    11. Chan, Ann L-C & Lee, Edward & Lin, Stephen, 2009. "The impact of accounting information quality on the mispricing of accruals: The case of FRS3 in the UK," Journal of Accounting and Public Policy, Elsevier, vol. 28(3), pages 189-206, May.
    12. Frederic S. Mishkin, 1983. "Introduction to "A Rational Expectations Approach to Macroeconomics: Testing Policy Ineffectiveness and Efficient-Markets Models"," NBER Chapters,in: A Rational Expectations Approach to Macroeconomics: Testing Policy Ineffectiveness and Efficient-Markets Models, pages 1-6 National Bureau of Economic Research, Inc.
    13. Collins, Daniel W. & Hribar, Paul, 2000. "Earnings-based and accrual-based market anomalies: one effect or two?," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 101-123, February.
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    Keywords

    Accruals anomaly; Mishkin Test; Market efficiency;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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