Journal of Accounting and Economics Vol. 43 No. 2-3 2007
Delisting returns and their effect on accounting-based market anomalies
Abstract
We show that tests of market efficiency are sensitive to the inclusion of delisting firm-years. When included, trading strategy returns based on anomaly variables can increase (for strategies based on earnings, cash flows and the book-to-market ratio) or decrease (for a strategy based on accruals). This is due to the disproportionate number of delisting firm-years in the lowest decile of these variables. Delisting firm-years are most often excluded because the researcher does not correctly incorporate delisting returns, because delisting return data are missing or because other research design choices implicitly exclude them.
- DOI
- 10.1016/j.jacceco.2006.12.002
- Volume
- 43
- Issue
- 2-3
- Pages
- 341-368
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref