Information and Accruals Strategy: When Does the Market Mis-price Accruals?
This paper hypothesizes that more active informed trading and intense information production help investors detect the low persistence of accruals, and consequently reduce the magnitude of accruals mis-pricing. Applying both the Mishkin (1983) and the hedge-portfolio tests to sub-samples sorted on the basis of a two-way classification – accruals and one of the information production measures, we find evidence showing that accruals mis-pricing is more conspicuous for stocks with high bid-ask spread, high analysts’ forecast error, and low presence of sophisticated institutional investors. Accruals trading strategies restricted to those informationally “opaque stocks can yield annualized four-factor adjusted abnormal returns (the Fama-French three factors and the momentum factor) ranging from 14％ to 23％. We also find that the market does not overreact to normal accruals for firms where information production is intense and effective.
accruals mis-pricing information investment strategy
Qiao Liu Rong Qi
University of Hong Kong St. John’s University
国际会议
昆明
英文
1-37
2005-07-05（万方平台首次上网日期，不代表论文的发表时间）