Why is the Accrual Anomaly not Arbitraged Away? The Role of Idiosyncratic Risk and Transaction Costs

By Christina A. Mashruwala, Shivaram Rajgopal, Terry Shevlin. 2006

445 citations recorded by the source corpus.

View Paper: https://www.semanticscholar.org/paper/5a249bd1d8ece523be584dbc72889fcb081d5730

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Citations in the corpus

R2 and Idiosyncratic Risk are not Interchangeable (2014, background): “As Pontiff (1996) and Mashruwala et al. (2006) argue, if the arbitrageur can perfectly hedge the fundamental value changes of the mispriced asset, the mispricing eventually goes away and the position is riskless.”
Agency Theory of Overvalued Equity as an Explanation for the Accrual Anomaly (2006, unknown): “…risk account for the apparent slow price adjustment to accrual information (e.g., Ali, Hwang, and Trombley, 2000, Lesmond and Wang, 2005, Hirshleifer, Teoh, and Yu, 2005, Mashruwala, Rajgopal, and Shevlin, 2006, and Pontiff, 2006).26 Our study does not pursue any of the above lines of inquiry.”
Innovative Efficiency and Stock Returns (2013, background): “Matolcsy and Wyatt (2008) find that industry-level technological progress, measured with patent count or journal citations, is positively associated with contemporaneous market valuation and future firmlevel earnings.”
The Media and Mispricing: The Role of the Business Press in the Pricing of Accounting Information (2014, unknown): “5 (instead of between 0 and 1) increases the model’s ability to distinguish between the extreme deciles when interactions are used (Mashruwala et al. 2006).”
Accounting Anomalies and Fundamental Analysis: A Review of Recent Research Advances (2010, background): “There are some exceptions, notably Korajczyk and Sadka (2004), who examine whether the momentum anomaly is robust to sophisticated measures of transactions costs and price pressure, Bushee and Ready (2006), and the papers examining arbitrage risk and liquidity costs (e.g., Pontiff, 2006; Mashruwala ”
Do Retail Trades Move Markets (2009, background): “Several papers (Ali, Hwang, and Trombley, 2003; Wurgler and Zhuravskaya, 2003; Mendenhall, 2004; Mushruwala, Rajgopal, and Shevlin, 2006; and Pontiff, 2006, among others) argue that stocks with high levels of idiosyncratic risk are more difficult to arbitrage.”
Short Arbitrage, Return Asymmetry, and the Accrual Anomaly (2011, unknown): “High residual volatility can make short arbitrage riskier, so we include a residual volatility measure (STDRES) as a control (see Pontiff 1996, Duan, Hu, and McClean 2009, Mashruwala, Rajgopal, and Shevlin 2006).”
Earnings Manipulation and Expected Returns (2013, background): “More recently, the focus has shifted to the limits of arbitrage and market-learning-related explanations (Mashruwala, Rajgopal, and Shevlin 2006; Lev and Nissim 2006; Li and Sullivan 2011; Green et al. 2011).”
Costly arbitrage and the myth of idiosyncratic risk (2006, background): “This is an unlikely possibility, especially for studies like Ali et al. (2003) and Mashruwala et al. (2006), since they show that the relation between arbitrage costs and returns is not monotonic—abnormal returns are increasing in arbitrage costs for apparently underpriced stocks, and decreasing in…”