![Why is the accrual anomaly not arbitraged away? The role of idiosyncratic risk and transaction costs [An article from: Journal of Accounting and Economics]](https://www.ebooknetworking.net/books/B00/0PA/bigB000PA9YMA.jpg)
Why is the accrual anomaly not arbitraged away? The role of idiosyncratic risk and transaction costs [An article from: Journal of Accounting and Economics]
Description
This digital document is a journal article from Journal of Accounting and Economics, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
We show that the accrual anomaly documented by Sloan (1996) [Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review 71: 289-315] is concentrated in firms with high idiosyncratic stock return volatility making it risky for risk-averse arbitrageurs to take positions in stocks with extreme accruals. Moreover, the accrual anomaly is found in low-price and low-volume stocks, suggesting that transaction costs impose further barriers to exploiting accrual mispricing.
Description:
We show that the accrual anomaly documented by Sloan (1996) [Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review 71: 289-315] is concentrated in firms with high idiosyncratic stock return volatility making it risky for risk-averse arbitrageurs to take positions in stocks with extreme accruals. Moreover, the accrual anomaly is found in low-price and low-volume stocks, suggesting that transaction costs impose further barriers to exploiting accrual mispricing.
