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

Author

Listed:
  • Georgios Papanastasopoulos
  • Dimitrios Thomakos
  • Tao Wang

Abstract

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.

Suggested Citation

  • 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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    File URL: http://econ.uop.gr/~econ/RePEc/pdf/noa.pdf
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    Keywords

    Net operating assets (NOA); stock returns; earnings management; growth.;

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