Examining the Performance of Accruals Trading Strategy

Document Type : Research Paper

Authors

1 Ph.D. Student, Department of Accounting, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran

2 Associate Professor, Department of Accounting, Faculty of Administrative Sciences and Economics, University of Isfahan, Isfahan, Iran,

3 Assistant Prof of economic department, Faculty of Administrative and Economics, University of Isfahan, Iran

Abstract

The main purpose of this article is to examine performance of the accruals trading strategy. According to Accruals trading strategy, investor takes not only a long position in firms with relative low accruals level but also a short position in firms with relative high accruals level. Specifically, the study examines the possibility of earning excess return and excess risk adjusted return implementing the traditional accruals strategy and percent accruals strategy. In so doing, we collected monthly data of 236 companies listed in Tehran Stock Exchange for the years 2011-2018. The hypotheses were tested using hedge portfolio method and t-test. The findings showed that implementing the percent accruals strategy resulted in earning excess return and excess risk adjusted return. Furthermore, implementing the traditional accruals strategy resulted in earning excess return. However, earning excess risk adjusted return implementing the traditional accruals strategy was not verified. Since earning excess return in the efficient market with no anomalies is not possible, findings thus showed that there was accruals anomaly in Tehran Stock Exchange. Furthermore, the results showed that percent accruals strategy was more productive than traditional accruals strategy.

Keywords

References

 
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History

  • Receive Date: 15 April 2019
  • Revise Date: 07 February 2020
  • Accept Date: 17 February 2020

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