Abstract

http://ssrn.com/abstract=166455
 
 

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Earnings-Based and Accrual-Based Market Anomalies: One Effect or Two?


Daniel W. Collins


University of Iowa - Department of Accounting

Paul Hribar


University of Iowa - Henry B. Tippie College of Business

May 25, 1999


Abstract:     
This paper investigates whether the accrual pricing anomaly documented by Sloan (1996) for annual data holds for quarterly data and whether this form of market mispricing is distinct from the post-earnings announcement drift anomaly. We find that the market appears to overestimate (underestimate) the persistence of the accrual (cash flow) component of quarterly earnings and, therefore, tends to overprice (underprice) accruals (cash flows). Moreover, the accrual (cash flow) mispricing appears to be distinct from post-earnings announcement drift. A hedge portfolio trading strategy that exploits both forms of market mispricing generates abnormal returns in excess of those based on unexpected earnings, accruals, or cash flow information alone.

Number of Pages in PDF File: 45

JEL Classification: G14, M41

working papers series


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Date posted: July 21, 1999  

Suggested Citation

Collins, Daniel W. and Hribar, Paul, Earnings-Based and Accrual-Based Market Anomalies: One Effect or Two? (May 25, 1999). Available at SSRN: http://ssrn.com/abstract=166455 or http://dx.doi.org/10.2139/ssrn.166455

Contact Information

Daniel W. Collins (Contact Author)
University of Iowa - Department of Accounting ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
319-335-0912 (Phone)
319-335-1956 (Fax)
Paul Hribar
University of Iowa - Henry B. Tippie College of Business ( email )
Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)
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References:  28
Citations:  112
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