The Accrual Anomaly in the U.K. Stock Market PDF Download
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Author: Leonidas C. Doukakis
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
On the basis of an accrual decomposition into two components capturing output growth and accounting distortions, this paper analyzes the effects of accounting accruals on firms' future performance in the U.K. stock market. Findings reveal a strong negative association of accruals with future profitability and stock returns. The effect of accruals on future earnings performance is driven only by the component attributable to accounting distortions, and the accrual effect on stock price performance is driven by both the component attributable to accounting distortions and the component attributable to growth. These two components complement each other in driving the accrual effect on stock returns.
Author: Leonidas C. Doukakis
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
On the basis of an accrual decomposition into two components capturing output growth and accounting distortions, this paper analyzes the effects of accounting accruals on firms' future performance in the U.K. stock market. Findings reveal a strong negative association of accruals with future profitability and stock returns. The effect of accruals on future earnings performance is driven only by the component attributable to accounting distortions, and the accrual effect on stock price performance is driven by both the component attributable to accounting distortions and the component attributable to growth. These two components complement each other in driving the accrual effect on stock returns.
Author: Morton Pincus
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Book Description
We consider stock markets in 20 countries to investigate whether the accruals anomaly (Sloan 1996), characterized by U.S. stock prices overweighting the role of accrual persistence, is a local manifestation of a global phenomenon. In addition, we structure our analysis to determine if the occurrence of the accrual anomaly is related to differences in institutional or accounting structures across the countries. We consider a country's legal tradition, institutional and accounting characteristics linked to earnings management, and capital market characteristics. We find that stock prices overweight accruals in four of the 20 countries we consider: Australia, Canada, the U.K., and the U.S. Results from our multivariate analysis indicate the accrual anomaly is more likely to occur in countries where extensive use of accrual accounting is permitted, the strength of shareholder protection is lower, concentration of share ownership is low, and the legal tradition derives from common law.
Author: Elroy Dimson
Publisher: CUP Archive
ISBN: 9780521341042
Category : Business & Economics
Languages : en
Pages : 328
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Book Description
Author: Nuno Soares
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Book Description
In this paper, we provide evidence related to the existence, or otherwise, of the accruals anomaly in the UK stock market. Specifically, we find that average annual abnormal returns generally decline as prior period accruals move from low to high. This outcome can be interpreted as broadly consistent with the accruals anomaly via which investors overweight the persistence of accruals and underweight the persistence of cash flows in predicting next period's earnings. Our results suggest that to make money out of any mispricing based upon ranking firms by accruals generally requires a portfolio strategy with long and, in particular, short positions in portfolios featuring relatively small capitalisation firms. When taking into account conservative estimates of trading costs, the investment strategy is seen to generate losses if an initially equally-weighted investment approach is used or positive, but not statistically significant, abnormal returns if a value-weighted approach is followed.Overall, we conclude that, whilst there is evidence of mispricing consistent with the accruals anomaly, the profitable exploitation of the anomaly is not necessarily possible when transactions costs are taken into account. Thus, the accruals anomaly is not so egregious in the UK as to challenge the semi-strong version efficient markets hypothesis.
Author: Paul Hoefsloot
Publisher: LAP Lambert Academic Publishing
ISBN: 9783848440184
Category :
Languages : en
Pages : 64
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Book Description
This paper investigates the existence of the accrual anomaly on the Dutch stock market. It documents that there is statistical evidence to accept that the cash flow component of current earnings is significantly more persistent than the accrual component of current earnings with respect to future earnings. Applying a trading strategy this paper shows that a significant abnormal return can de made by constructing a portfolio consisting of firms with relatively low accruals. However, contrary to U.S. findings, a hedge return consisting of a long position in low accruals firms and a short position in high accruals firms (hedge portfolio) generates neither substantial nor statistically significant returns.
Author: George A. Papanastasopoulos
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The authors examine the negative relation of traditional accruals and % accruals with future returns in the Greek stock market. Positive abnormal returns from hedge portfolios on both accrual measures summarize the economic significance of this negative relation. The magnitude of returns obtained from traditional accruals is higher than that obtained from % accruals, contrary to existing evidence from the U.S. capital market. The analysis suggests that the accrual anomaly appears to be present in the Greek stock market: this has macroeconomic implications because firms with low reported accruals may exhibit higher stock returns and at this time, during the ongoing Greek capital market crisis, investors are more likely to gain substantial abnormal returns in the future - if and when the Greek economy returns to positive growth.
Author: Florence Thomas O'Donoghue
Publisher:
ISBN:
Category : Stock exchanges
Languages : en
Pages : 85
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Book Description
Author: Leonard Zacks
Publisher: John Wiley & Sons
ISBN: 1118127765
Category : Business & Economics
Languages : en
Pages : 352
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Book Description
Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.
Author: George A. Papanastasopoulos
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We investigate the accrual anomaly, conditional on the mandatory adoption of Financial Reporting Standard No. 3: Reporting Financial Performance (FRS3) by UK firms. We show that return predictability associated with accruals attributable to accounting distortions is largely attenuated and not statistically significant at conventional levels, after the introduction of FRS3. In contrary, the predictive ability of accruals attributable to growth for future returns is not substantially affected and remains strong in magnitude from the pre-FRS3 to the post-FRS3 periods. As a consequence, total accruals continue to predict returns following FRS3. Overall, our findings are broadly consistent with increased accounting disclosure and investor protection eliminating inefficiencies and promoting accurate share prices in the capital market.
Author: Paul William Colaco
Publisher:
ISBN:
Category :
Languages : en
Pages :
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