Do Short-Sellers Arbitrage Accounting-Based Stock Market Anomalies?*

Posted: 22 Mar 2005  

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: September 2005

Abstract

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

Suggested Citation

Hirshleifer, David A. and Teoh, Siew Hong and Yu, Jeff Jiewei, Do Short-Sellers Arbitrage Accounting-Based Stock Market Anomalies?* (September 2005). AFA 2006 Boston Meetings Paper. Available at SSRN: https://ssrn.com/abstract=687254 or http://dx.doi.org/10.2139/ssrn.687254

David A. Hirshleifer

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 (Contact Author)

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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