The Limits to Arbitrage Revisited: The Accrual and Asset Growth Anomalies

34 Pages Posted: 9 Aug 2011 Last revised: 19 Oct 2014

See all articles by Xi Li

Xi Li

University of Arkansas - Department of Finance

Rodney N Sullivan

University of Virginia, Darden Graduate School of Business

Date Written: December 22, 2010

Abstract

Using idiosyncratic volatility as a proxy for arbitrage costs, the authors found that the highly publicized accrual and asset growth anomalies exist because of high barriers to arbitrage, occurring predominantly in the universe of stocks with higher arbitrage risks. Therefore, investors who seek to profit from the accrual and asset growth anomalies must bear greater uncertainty in outcomes than was previously understood.

Keywords: Behavioral Finance, Limits to Arbitrage, Equity Investments, Equity Market Valuation and Return Analysis, Risk Management, Portfolio Risk Management, Risk Management Strategies, Portfolio Management, Risk Management, Equity Portfolio Management Strategies, Active Management

Suggested Citation

Li, Xi and Sullivan, Rodney N, The Limits to Arbitrage Revisited: The Accrual and Asset Growth Anomalies (December 22, 2010). Financial Analysts Journal 67 (4-5), 50-66, July/August, 2011. Available at SSRN: https://ssrn.com/abstract=1907313

Xi Li

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

Rodney N Sullivan (Contact Author)

University of Virginia, Darden Graduate School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-243-0644 (Phone)

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