Do Short-Sellers Arbitrage Accounting-Based Stock Market Anomalies?*
David A. Hirshleifer
University of California, Irvine - Paul Merage School of Business
Siew Hong Teoh
University of California - Paul Merage School of Business
Jeff Jiewei Yu
Southern Methodist University - Cox School of Business
AFA 2006 Boston Meetings Paper
We find a positive association between short-selling and accruals, capital expenditures, and (less robustly) NOA among NASDAQ firms during 1988-2003. The associated return anomalies are asymmetric; the absolute value of mean abnormal returns is larger for high accrual or high capital expenditure firms than low accrual or low capital expenditure firms on NASDAQ, but not on NYSE. For an NOA-based strategy the return asymmetry is also larger on NASDAQ than on NYSE. These findings indicate that for some firms short arbitrage weakens these anomalies on the down side, but that among NASDAQ firms short sales constraints limit the effectiveness of short arbitrage.
Keywords: Arbitrage, short sales, anomalies, market efficiency
JEL Classification: G14, M41
Date posted: March 22, 2005
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