Short Arbitrage, Return Asymmetry and the Accrual Anomaly

Hirshleifer, David; Teoh, Siew Hong; Yu, Jeff Jiewei

doi:10.2139/ssrn.1026044

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Short Arbitrage, Return Asymmetry and the Accrual Anomaly

52 Pages Posted: 20 Jun 2007 Last revised: 9 Aug 2018

See all articles by David Hirshleifer

David Hirshleifer

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER)

Jeff Jiewei Yu

University of Arizona

Date Written: October 7, 2010

Abstract

We find a positive association between short-selling and accruals during 1988-2009, and that asymmetry between the long and short sides of the accrual anomaly is stronger when constraints on short-arbitrage are more severe (low availability of loanable shares as proxied by institutional holdings). Short arbitrage occurs primarily among firms in the top accrual decile. Asymmetry is only present on NASDAQ. Thus, there is short arbitrage of the accrual anomaly, but short sale constraints limit its effectiveness. Presentation slides available at http://ssrn.com/abstract=3228837

Keywords: Accruals, anomalies, arbitrage, short sales, market efficiency

JEL Classification: M41, M43, G14, G10

Suggested Citation: Suggested Citation

Hirshleifer, David and Teoh, Siew Hong and Yu, Jeff Jiewei, Short Arbitrage, Return Asymmetry and the Accrual Anomaly (October 7, 2010). Available at SSRN: https://ssrn.com/abstract=1026044 or http://dx.doi.org/10.2139/ssrn.1026044