Abstract

http://ssrn.com/abstract=891662
 
 

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Do Mutual Funds Profit from the Accruals Anomaly?


Ashiq Ali


University of Texas at Dallas - Naveen Jindal School of Management

Xuanjuan Chen


Shanghai University of Finance and Economics

Tong Yao


University of Iowa - Henry B. Tippie College of Business

Tong Yu


University of Rhode Island - College of Business Administration

June 1, 2007

AFA 2007 Chicago Meetings
Journal of Accounting Research, Forthcoming

Abstract:     
Using data on both fund stockholdings and fund returns, we show that actively-managed equity mutual funds are able to make significant excess returns net of actual transaction costs from trading on the accruals anomaly. We find that the top 10% of mutual funds that most actively follow the accruals strategy have Fama-French 3-factor alphas of 2.83% per year. We also find that mutual funds more active in using the accruals strategy exhibit higher return volatility and higher flow volatility. These factors may represent the adverse consequences of arbitrage risk that funds face when they trade on the accruals anomaly (Shleifer & Vishny 1997).

Number of Pages in PDF File: 41

Keywords: accruals anomaly, mutual fund, arbitrage risk

JEL Classification: G12,G20

working papers series


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Date posted: March 21, 2006 ; Last revised: February 3, 2008

Suggested Citation

Ali, Ashiq and Chen, Xuanjuan and Yao, Tong and Yu, Tong, Do Mutual Funds Profit from the Accruals Anomaly? (June 1, 2007). AFA 2007 Chicago Meetings; Journal of Accounting Research, Forthcoming. Available at SSRN: http://ssrn.com/abstract=891662 or http://dx.doi.org/10.2139/ssrn.891662

Contact Information

Ashiq Ali (Contact Author)
University of Texas at Dallas - Naveen Jindal School of Management ( email )
800 West Campbell Road, SM41
Richardson, TX 75080-3021
United States
972-883-6360 (Phone)
972-883-6811 (Fax)
HOME PAGE: http://www.utdallas.edu/~axa042200/
Xuanjuan Chen
Shanghai University of Finance and Economics ( email )
777 Guoding Road
Shanghai, Shanghai 200433
China
Tong Yao
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
Tong Yu
University of Rhode Island - College of Business Administration ( email )
Kingston, RI 02881
United States
(401) 874-7415 (Phone)
(401) 874-4312 (Fax)
HOME PAGE: http://www.cba.uri.edu/tong
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