SHORT ARBITRAGE, RETURN ASYMMETRY AND THE ACCRUAL ANOMALY

Hirshleifer, David and Teoh, Siew Hong and Yu, Jeff Jiewei (2009): SHORT ARBITRAGE, RETURN ASYMMETRY AND THE ACCRUAL ANOMALY.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Accruals; anomalies; arbitrage; short sales; market efficiency
• Subjects: G - Financial Economics > G1 - General Financial Markets; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting

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