Can the Earnings Fixation Hypothesis Explain the Accrual Anomaly? PDF Download
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Author: Linna Shi Publisher: ISBN: Category : Languages : en Pages : 32
Book Description
This paper provides empirical evidence on whether the earnings fixation hypothesis can explain the accrual anomaly originally documented in Sloan (1996). Our analytical model yields the prediction that if investors fixate on reported earnings, the effectiveness of the accrual strategy will increase in the responsiveness of the stock price to earnings and the differential persistence of cash flows relative to accruals. Our empirical evidence confirms our prediction and lends support to the earnings fixation hypothesis.
Author: Linna Shi Publisher: ISBN: Category : Languages : en Pages : 32
Book Description
This paper provides empirical evidence on whether the earnings fixation hypothesis can explain the accrual anomaly originally documented in Sloan (1996). Our analytical model yields the prediction that if investors fixate on reported earnings, the effectiveness of the accrual strategy will increase in the responsiveness of the stock price to earnings and the differential persistence of cash flows relative to accruals. Our empirical evidence confirms our prediction and lends support to the earnings fixation hypothesis.
Author: Nader Hafzalla Publisher: ISBN: Category : Languages : en Pages : 48
Book Description
We document how the effectiveness of an accruals-based trading strategy changes systematically with the financial health of the sample firms or with the benchmark used to identify an extreme accrual. Our refinements significantly improve the strategy's annual hedge return, and do so mostly because they improve the return earned on the long position in low accrual stocks. These results are important because recent evidence has shown that, absent these quot;repairs,quot; the accrual strategy does not yield a significantly positive return in the long portion of the hedge portfolio. We also find that our new measure of accruals is not dependent on the presence or absence of special items and it identifies misvalued stocks just as well for loss firms as for gain firms, in contrast to the traditional accruals measure. Finally, we show that our repairs succeed where the traditional measure of accruals fails because they more effectively select firms where the difference between sophisticated and naiuml;ve forecasts are the most extreme. As such, our results are consistent with Sloan's earnings fixation hypothesis and are inconsistent with some alternative explanations for the accrual anomaly.
Author: Carlos J. O. Trejo-Pech Publisher: ISBN: Category : Languages : en Pages :
Book Description
ABSTRACT: Recent research suggests that investors and financial analysts systematically fail to fully interpret relevant information revealed on firms' financial statements. Sloan (1996) developed the accrual anomaly problem, which predicts a systematically negative relationship between accruals, the difference between earning and cash, and future abnormal returns in the U.S. stock market. A potential explanation to this problem, termed the fixation hypothesis, states that investors are too current-oriented or naively fixated towards earnings and do not fully recognize the information in accruals and cash flow. While the accrual anomaly has been extensively investigated there is no consensus yet on why this problem is observed in the U.S. market. The prevalent hypothesis is still the fixation hypothesis. Current research debates the underlying phenomenon behind the accrual anomaly. In my study, the accrual anomaly is documented as present in the U.S. food supply chain, a subset representing around 8% of the U.S. market. An economic-based explanation of the results is provided. Evidence is found that agribusinesses with high accruals manipulate earnings misleading the market and yielding negative abnormal returns in the subsequent period. Results also suggest that agribusinesses with low accruals constitute a subset of firms with poor past economic performance sending signals to the market, through accruals, that their hard financial times are over. The complex nature of firms with low accruals, however, makes it difficult for the market to make correct predictions. This possible explains the inconsistent results in previous studies (i.e. the sign of abnormal returns for firms with low accruals varies from sample to sample in the current literature).
Author: Leonard Zacks Publisher: John Wiley & Sons ISBN: 0470905905 Category : Business & Economics Languages : en Pages : 352
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: Peter Ising Publisher: Springer Science & Business Media ISBN: 3658037946 Category : Business & Economics Languages : en Pages : 242
Book Description
The beginning of the new millennium was characterized by company scandals in accounting around the world. A transparent and fair presentation of financial statements is beneficial for capital market participants. Especially around initial public offerings different incentives of these players exist to influence financial statements in diverse aspects. Therefore, studies of earnings management try to identify abnormal behavior. Peter Ising covers additional aspects to shed light on substantial drivers of discretionary reporting behavior around going public. Factors like influence on real activities, industry affiliation, and specific years in the IPO process add further insight to this theoretical and practical topic. The dependence on these factors is high and confirms that company specifics are important for interpretation of financial results.
Author: Leonard Zacks Publisher: John Wiley & Sons ISBN: 1118127765 Category : Business & Economics Languages : en Pages : 352
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: Cheng F. Lee Publisher: Center for PBBEFR & Airiti Press ISBN: 9864370391 Category : Business & Economics Languages : en Pages :
Book Description
Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.
Author: Joshua Ronen Publisher: Springer Science & Business Media ISBN: 0387257713 Category : Business & Economics Languages : en Pages : 587
Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Author: Frederic S. Mishkin Publisher: University of Chicago Press ISBN: 0226531929 Category : Business & Economics Languages : en Pages : 184
Book Description
A Rational Expectations Approach to Macroeconometrics pursues a rational expectations approach to the estimation of a class of models widely discussed in the macroeconomics and finance literature: those which emphasize the effects from unanticipated, rather than anticipated, movements in variables. In this volume, Fredrick S. Mishkin first theoretically develops and discusses a unified econometric treatment of these models and then shows how to estimate them with an annotated computer program.
Author: Linna Shi
Author: Linna Shi
Author: Nader Hafzalla
Author: Carlos J. O. Trejo-Pech
Author: Leonard Zacks
Author: Peter Ising
Author: Leonard Zacks
Author: Cheng F. Lee
Author: American Accounting Association
Author: Joshua Ronen
Author: Frederic S. Mishkin