Short Arbitrage, Return Asymmetry and the Accrual Anomaly

52 Pages Posted: 20 Jun 2007 Last revised: 15 Oct 2010

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Siew Hong Teoh

University of California - Paul Merage School of Business

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.

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

JEL Classification: M41, M43, G14, G10

Suggested Citation

Hirshleifer, David A. 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

David A. Hirshleifer (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Siew Hong Teoh

University of California - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

Jeff Jiewei Yu

University of Arizona ( email )

Tucson, AZ 85721
United States
520-621-1273 (Phone)

HOME PAGE: http://https://accounting.eller.arizona.edu/people/jeff-jiewei-yu

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