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Author: Dan Palmon Publisher: ISBN: Category : Languages : en Pages :
Book Description
Research has shown that a trading strategy based on publicly available accounting accrual information can earn abnormal returns of approximately 10 percent in the year after it is applied. This article reports a study of whether this quot;accruals anomalyquot; is sensitive to company size. The empirical results suggest that the interaction between company size and accruals provides incremental information about future returns and that the accruals anomaly is not independent of company size. The negative abnormal returns when an accruals-anomaly strategy is applied come primarily from the larger companies, and the positive abnormal returns come from the smaller companies.
Author: Dan Palmon Publisher: ISBN: Category : Languages : en Pages :
Book Description
Research has shown that a trading strategy based on publicly available accounting accrual information can earn abnormal returns of approximately 10 percent in the year after it is applied. This article reports a study of whether this quot;accruals anomalyquot; is sensitive to company size. The empirical results suggest that the interaction between company size and accruals provides incremental information about future returns and that the accruals anomaly is not independent of company size. The negative abnormal returns when an accruals-anomaly strategy is applied come primarily from the larger companies, and the positive abnormal returns come from the smaller companies.
Author: Ala Ahmad Publisher: ISBN: Category : Languages : en Pages :
Book Description
This research explores new evidence on the profitability, consistency and potential explanations of the accruals anomaly. We extend prior research into the association between earnings and share price by discrirninating between firms on the basis of the abnormal accruals contained in the reported operating profits. We investigate the accounting abnormal accruals enigma using U.K company data for the period 1968- 2005 to see whether companies reporting incomes consisting of the highest [lowest] operating abnormal accruals as a proportion of total assets significantly earn lower [higher] returns than the generality of the companies. We define a firm's abnormal accrual as the difference between its actual and normal total accruals. Total accruals are calculated as the change in non-cash working capital before income taxes payable less total depreciation expense. The themes of this thesis are two-fold. First, the time-series version of the Modified Jones Model is employed to decompose total operating accruals as they appear on the sample companies' financial statements into normal and abnormal accruals. Second, an empirical examination of the profitability and consistency of the abnormal accruals anomaly is undertaken. Abnormal returns for abnormal accruals deciles are estimated using a range of tests: the market-, the size-, the book-to-market- and the size-and-book-to-market-adjusting tests. Our abnormal returns estimates for the abnormal accruals deciles show evidence that the abnormal accruals anomaly in the UK is driven particularly by the highest abnormal accruals firms with significant negative abnormal returns over three years of about 4-5% per annum. Potential risk explanations for the observed accruals anomaly based on variety of tests including the use of the Fama and French three factor model are provided. The findings indicate that the abnormal accruals anomaly is robust after controlling for the risk factors. Therefore, the implication of this study is to short sell those shares in the highest abnormal accruals decile or, alternatively, to avoid buying them.
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: Abdul Rafay Publisher: ISBN: Category : Languages : en Pages : 12
Book Description
The purpose of this research is to determine the impact of “Capital investment anomaly” and “Accrual anomaly” on stock returns after controlling the size and book-to-market effects. This study aims to fill a gap regarding the implications of capital investment anomaly and accrual anomaly in South Asian economies, and primarily focused on two developing economies from SAARC region; India and Pakistan. This study uses 320 company-year observations using a sample period of 2009-2014. The sample is representative of 50% of non-financial companies selected systematically from nine different sectors included in Pakistan Stock Exchange (KSE- 100 index) and Bombay Stock Exchange (BSE-100 index) each. Selection is based on market capitalization to mitigate any bias in results. Preliminary analysis includes understanding stock performance of capital investment-based, and accrual-based portfolios, followed by stock performance of combined effect portfolios, and sector analysis. Lastly, regression analysis allows determining impact of both anomalies on returns as well as their independence or interdependence. The results of this study show that there exists a negative relationship between Stock Returns and Capital Investment/Accruals. In addition to this, we found that both anomalies are not distinct and work together and are attributed to country characteristics specific to the SAARC/South Asia region. All of the coefficients are statistically significant. The separate results for India and Pakistan are helpful for practitioners to know what strategy to adopt in order to maximize the returns. Combined results are beneficial for prospective investors. The mixed trend of returns for different sectors is useful for both managers and investors in the sense that both anomalies are independent of each other. From a theory development perspective, it reveals the differences in existing literature due to change in geographical context.
Author: Jin Ginger Wu Publisher: ISBN: Category : Corporations Languages : en Pages : 52
Book Description
Interpreting accruals as working capital investment, we hypothesize that firms rationally adjust their investment to respond to discount rate changes. Consistent with the optimal investment hypothesis, we document that (i) the predictive power of accruals for future stock returns increases with the covariations of accruals with past and current stock returns, and (ii) adding investment-based factors into standard factor regressions substantially reduces the magnitude of the accrual anomaly. High accrual firms also have similar corporate governance and entrenchment indexes as low accrual firms. This evidence suggests that the accrual anomaly is more likely to be driven by optimal investment than by investor overreaction to excessive growth or over-investment.
Author: Dan Palmon
Author: Dan Palmon
Author: Tzachi Zach
Author: Ala Ahmad
Author: Leonard Zacks
Author: Bernardine Mei Fong Low
Author: Abdul Rafay
Author: Jin Ginger Wu
Author: Institute of Chartered Financial Analysts
Author: Guohua Jiang
Author: Xiaohu Zhang