Accrual Anomaly and Idiosyncratic Risk in Emerging Capital Market

2021 ◽  
Author(s):  
Marselinus Asri
Keyword(s):  
Capital Market ◽  
Idiosyncratic Risk ◽  
Accrual Anomaly

scholarly journals ADVERTISING, RESEARCH AND DEVELOPMENT, AND CAPITAL MARKET RISK: HIGHER RISK FIRMS VERSUS LOWER RISK FIRMS

2012 ◽  
Vol 13 (4) ◽  
pp. 724-744 ◽  
Author(s):  
Miao-Ling Chen ◽  
Chi-Lu Peng ◽  
An-Pin Wei
Keyword(s):  
Research And Development ◽  
Stock Returns ◽  
Capital Market ◽  
Lower Risk ◽  
Idiosyncratic Risk ◽  
Senior Management ◽  
Limited Resources ◽  
Advertising Research ◽  
Senior Executives ◽  
Firm Risk

This study examines how a firm's advertising and R&D affects the firm's β-risk and idiosyncratic risk, which are metrics of interest to both finance executives and senior management. Due to the existence of a non-normal and heteroscedasticity dataset, we use quantile regression to analyze the sample to understand the full behavior of our non-normally distributed datapoints. The evidence of this study shows that: (1) Advertising is significantly associated with lower β-risk for firms with lower, median and higher β-risk. (2) R&D significantly increases β-risk for firms with median and higher β-risk firms. (3) Advertising is significantly associated with lower idiosyncratic risk for firms with higher idiosyncratic risk. (4) R&D is significantly associated with higher idiosyncratic risk for firms with median and higher idiosyncratic risk. In summary, our evidence shows that both advertising and R&D have a stronger effect on firms with higher β- and idiosyncratic risk than on those with lower β- and idiosyncratic risk, respectively. Our findings are useful to help both management executives and investors. Firm managers can allocate limited resources more efficiently to reduce their firm risk; investors could exert their influence on firm's senior executives to make decisions that are beneficial to stock returns.

scholarly journals Accrual anomaly in the Brazilian capital market

2012 ◽  
Vol 9 (4) ◽  
pp. 421-440 ◽  
Author(s):  
César Medeiros Cupertino ◽  
Antônio Lopo Martinez ◽  
Newton Carneiro Affonso da Costa Jr.
Keyword(s):  
Capital Market ◽  
Accrual Anomaly

scholarly journals O Risco Idiosincrático é Relevante no Mercado Brasileiro?

2007 ◽  
Vol 5 (1) ◽  
pp. 41
Author(s):  
Fernando Caio Galdi ◽  
José Roberto Securato
Keyword(s):  
Time Series ◽  
Capital Market ◽  
Idiosyncratic Risk ◽  
Portfolio Returns ◽  
The Us ◽  
One Step ◽  
The Relationship ◽  
Diversified Portfolio

This paper analyses the relationship between idiosyncratic risk and diversified portfolio returns on Brazil’s capital market. Following Goyal and Santa-Clara (2003) and Bali et alii (2005) we use volatility measures that capture systematic and idiosyncratic risk. For the identification of the relationship between idiosyncratic risk and portfolio returns we use a time series framework regressing volatility measures and portfolio returns one step ahead from 1999:01 to 2006:03. Additionally, we carry out robustness tests to validate our results. We found no evidence of a relationship between idiosyncratic risk and portfolio returns for the Brazilian capital market. Our evidence is similar to those from Bali et alii (2005) for the US capital market, which challenges the Goyal e Santa-Clara (2003) findings.

scholarly journals Investor perception of fair value evaluation: focusing on financial instruments

2019 ◽  
Vol 16 (1) ◽  
pp. 203-214
Author(s):  
Minjung Kang ◽  
Young-Tae Yoo
Keyword(s):  
Capital Market ◽  
Predictive Value ◽  
Abnormal Returns ◽  
Fair Value ◽  
Financial Instruments ◽  
Accrual Anomaly ◽  
Predictive Values ◽  
Accounting Performance ◽  
Value Evaluation ◽  
Market Anomaly

This study analyzed capital market investors’ recognition of the predictability of fair value-based valuation. It was examined if market investors overvalue the predictive value of fair value by comparing that value with that measured in accounting performance. The results reveal that investors are likely to overvalue fair value more than predictive values reflected in accounting performance. In particular, the results show that investors can gain abnormal returns through the market anomaly due to the functional fixation that investors cannot distinguish between unrealized profits and realized ones. Though there are considerable studies about accrual anomaly, few studies explore it with the separation of unrealized profits from total accruals. A number of studies about the causes of accrual anomaly have been conducted from various perspectives. The analysis of this study argues that the unrealized profits derived from fair value evaluation can be a cause of accrual anomaly. On the basis of the result, this study suggests that information about unrealized earnings should be reported separately.

scholarly journals The Impact of Unsystematic Risk on Stock Returns in an Emerging Capital Markets (ECM’s) Country: An Empirical Study

2017 ◽  
Vol 9 (1) ◽  
pp. 189
Author(s):  
Mohamed Masry ◽  
Heba El Menshawy
Keyword(s):  
Stock Returns ◽  
Capital Market ◽  
Stock Exchange ◽  
Predictive Ability ◽  
Idiosyncratic Risk ◽  
Weekly Basis ◽  
Future Return ◽  
Emerging Capital Markets ◽  
The Impact ◽  
Egyptian Stock Exchange

In this study, we aim to introduce behavior of unsystemayic risk and its forecasting ability in prediction of future return in Egyptian Stock Exchange (ESE) as an Emerging Capital market (ECM), over the period of 2006 to 2015. We measure equally weighted unsystemayic volatility by following the Campbell’s (2001) Indirect Method, by considering market size and weekly basis. Our results reveal that unsystemayic risk is the biggest component of total volatility and show no trend, although market volatility has a slow decreasing trend in this period. We also find that small size stocks have slightly higher volatility than the big size stocks but both portfolios have similar idiosyncratic risk behavior. Finally, our analyses about the predictive ability of various measures of unsystematic risk provide evidence that unsystematic risk volatility is not a significant predictor for future return in ESE.

scholarly journals Essays in financial accounting and banking

2017 ◽  
Author(s):  
Ανδρέας Τσάλας
Keyword(s):  
Stock Returns ◽  
Capital Market ◽  
Stock Price ◽  
Structural Changes ◽  
Cash Flows ◽  
Common Finding ◽  
Accrual Anomaly ◽  
Managerial Performance ◽  
High Volatility ◽  
Influential Paper

In this thesis I examine two aspects of these issues that have been intensified form the onset of the financial crisis: the Accrual Anomaly in the Greek capital market and Non-Performing Loans (NPLs, hereafter) in the framework of the International Experience. The accrual anomaly was first tested by Sloan in his influential paper (1996). In that paper he present evidence that accruals are less persistent than cash flows and that investors fixate on earnings failing to correctly distinguish between their different properties. My results strongly suggest that low accrual firms did have higher future returns, actually quite higher returns that firms with high accruals, in an environment of extremely high volatility, structural changes in the economy, market crashes and fiscal crises. Total accruals are negatively related to future profitability and stock returns, and the earnings and stock price performance of accrual hedge portfolios provide a meaningful economic summary of this relationship. The findings suggest that growth is mostly responsible for the lower earnings persistence, while accounting distortions are probably not. The results suggest that growth determinants do not behave as substitutes to efficiency determinants in motivating the accrual effect on future stock returns in the Greek capital market. In particular, the findings indicate that the growth component is dominant, as is evidenced by both regressions and hedging portfolios, and, furthermore, it appears that the results are mainly driven by the post 2001 period. The empirical evidence on NPLs implies that both macroeconomic, namely GDP, unemployment and interest rate and bank-specific, i.e. bad management and luck too, skimping, moral haphazard, too big to fail and size effect, factors may influence loan portfolio quality. Additionally, a common finding of related studies is that problem loans evolve counter cyclically in relation to the broader macroeconomic environment. These results should be taken into serious consideration by regulators and policy makers. Bank performance and inefficiency indicators should be thought as crucial determinants of future problem loans. Therefore, regulators trying to determine which banks may face increased problems with future NPLs need to concentrate on managerial performance and procedures so as to prevent future financial vulnerability. The results are consistent with the increased growth of the Greek economy after the introduction of Euro and the subsequent opening up pf the Greek product and labor market, and, mostly, the liberalization of the financial sector. It appears that in times of crisis companies that cannot operate efficiently on their accruals jeopardize their future profitability: growth obviously works pro-cyclically while efficiency countercyclically.

scholarly journals The Existence of Accrual Anomaly Phenomena in Indonesia Capital Market

2020 ◽  
Vol 21 (2) ◽  
Author(s):  
Gerrinko Giffari Wurintara ◽  
Hamidah Hamidah
Keyword(s):  
Capital Market ◽  
Accrual Anomaly
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