SHORT ARBITRAGE, RETURN ASYMMETRY AND THE ACCRUAL ANOMALY

David Hirshleifer, Siew Hong Teoh and Jeff Jiewei Yu

MPRA Paper from University Library of Munich, Germany

Abstract: We find a positive association between short-selling and accruals during 1988-2003. Short arbitrage occurs primarily among firms in the top accrual decile, and firms with sufficiently high supply of loanable shares (proxied by institutional holdings). Consistent with limits to short arbitrage, there is an asymmetry between the up- and down- sides of the accrual anomaly. Asymmetry is only present on NASDAQ, and is significantly stronger among firms with low institutional holdings, low liquidity (turnover and size), and high residual volatility. Thus, there is short arbitrage of the accrual anomaly, but short sale constraints limit its effectiveness.

Keywords: Accruals; anomalies; arbitrage; short sales; market efficiency (search for similar items in EconPapers)
JEL-codes: G1 M41 (search for similar items in EconPapers)
Date: 2009-07-27
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https://mpra.ub.uni-muenchen.de/16487/1/MPRA_paper_16487.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/25924/2/MPRA_paper_25924.pdf revised version (application/pdf)

Related works:
Journal Article: Short Arbitrage, Return Asymmetry, and the Accrual Anomaly (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16487

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