Accrual Anomaly in the Brazilian Capital Market
Journal Title: BAR: Brazilian Administration Review - Year 2012, Vol 9, Issue 4
Abstract
This paper analyzes the phenomenon known as accrual anomaly in Brazil. In particular, we examine two hypotheses: (a) that the earnings expectation included in the stock price fails to reflect the difference in persistence of the earnings components (accruals and cash flows); and (b) that the construction of a hedge portfolio by taking a long (short) position in assets with low (high) accruals generates consistently abnormal returns. The data set includes nonfinancial firms listed on the BM&FBOVESPA between 1990 and 2008. The empirical tests required conducting panel data regressions to identify the persistence of earnings and their components; the Mishkin test to identify whether the market rationally prices earnings; and the composition of a zero-investment (hedge) portfolio to analyze whether a trading strategy based on accruals consistently provides abnormal positive returns. The results indicate that the accrual component is not mispriced by the Brazilian market, and that a trading strategy based on accruals does not provide consistently positive returns. Although this evidence does not encourage arbitrage, the results are relevant from various perspectives. The methodology applied permitted identifying the quality of earnings and of their components, as well as association between the components of earnings and returns.
Authors and Affiliations
Cupertino, César Medeiros; Martinez, Antônio Lopo; Costa Jr. , Newton Carneiro Affonso da
Keywords
Related Articles
- EP ID EP40525
- DOI -
- Views 283
- Downloads 0
The Entrepreneurial Orientation-Dominant Logic-Performance Relationship in New Ventures: an Exploratory Quantitative Study
Entrepreneurial Orientation (EO) has received substantial conceptual and empirical attention, representing one of the few areas in entrepreneurship research in which a cumulative body of knowledge is developing. Nonethe...
Are Country and Size Risks Priced in the Brazilian Stock Market?
When estimating a firm’s cost of equity for valuation and other purposes in emerging markets without (or with only partial) capital market integration, many practitioners include a premium for country risk. In principle...
Effects of Internationalization on Ownership Structure: Evidence from Latin American Firms
We analyze the direct and simultaneous effects of internationalization on the ownership structure of Latin American companies based on agency theory. Using a sample of 425 Latin American firms between 2007 and 2011, wh...
Sharing Economy and Sustainability Logic: Analyzing the Use of Shared Bikes
A sustainability-oriented logic is required in order to change the consumerist logic of the society. This is possible by changing the beliefs and values shared among stakeholders regarding their behaviors. The instituti...
Leadership, Personal Values, and Cultural Context in Brazil, China, and the USA
This research examines the association between configurations of personal values and managerial incumbency among professionals in Brazil, the US, and Asia. Our research is different from classical leadership research as...