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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27466
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| Title: | The Persistence of the Accruals Anomaly |
| Authors: | Lev, Baruch
Nissim, Doron |
| Issue Date: | Apr-2004 |
| Series/Report no.: | Baruch Lev-06 |
| Abstract: | The accruals anomaly - the negative relationship between accounting
accruals and subsequent stock returns - has been well documented in the
academic and practitioner literatures for almost a decade. To the extent
that this anomaly represents market inefficiency, one would expect
sophisticated investors to learn about it and arbitrage the anomaly
away. Yet, we show that the accruals anomaly still persists and its
magnitude has not declined over time. While we find that institutional
investors react promptly to accruals information, it is clear that their
reaction is rather weak and is primarily characteristic of active
investors who constitute a minority of institutions. The main reason:
Extreme accruals firms have characteristics which are unattractive to
most institutional investors. Individual investors are by and large
unable to profit from trading on accruals information due to the high
transaction and information costs associated with implementing a
consistently profitable accruals strategy. Consequently, the accruals
anomaly persists, and will probably endure. |
| URI: | http://hdl.handle.net/2451/27466 |
| Appears in Collections: | Accounting Working Papers
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