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Do Mutual Funds Profit from the Accruals Anomaly?
Author(s) -
ALI ASHIQ,
CHEN XUANJUAN,
YAO TONG,
YU TONG
Publication year - 2008
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/j.1475-679x.2007.00263.x
Subject(s) - accrual , closed end fund , mutual fund , business , open end fund , fund of funds , volatility (finance) , passive management , portfolio , finance , monetary economics , financial economics , economics , institutional investor , earnings , corporate governance , market liquidity
Using data on both fund stockholdings and fund returns, we examine whether actively managed equity mutual funds trade on and profit from the accruals anomaly. We find that few, if any, mutual funds trade on the anomaly. The top 10% of mutual funds that have the highest portfolio weights in low‐accruals stocks have a greater, but still relatively small, exposure to low‐accruals stocks. Nonetheless, these funds make significant profit net of actual transaction costs, exhibiting an average Fama‐French three‐factor alpha of 2.83% per year. We also find that these funds are smaller, less diversified, and exhibit higher fund return volatility and higher fund flow volatility.