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Information in Balance Sheets about Future Stock Returns: Evidence from Net Operating Assets


  • Georgios Papanastasopoulos
  • Dimitrios Thomakos
  • Tao Wang


This 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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  • Georgios Papanastasopoulos & Dimitrios Thomakos & Tao Wang, 2007. "Information in Balance Sheets about Future Stock Returns: Evidence from Net Operating Assets," Working Papers 0009, University of Peloponnese, Department of Economics.
  • Handle: RePEc:uop:wpaper:0009

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    References listed on IDEAS

    1. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    2. Hossein Asgharian, 2003. "Are highly leveraged firms more sensitive to an economic downturn?," The European Journal of Finance, Taylor & Francis Journals, vol. 9(3), pages 219-241.
    3. Klevmarken, N. Anders, 1989. "Introduction," European Economic Review, Elsevier, vol. 33(2-3), pages 523-529, March.
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    Net operating assets (NOA); stock returns; earnings management; growth.;

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