The prestigious Journal of Accounting and Economics has accepted an article for publication which was authored by three UT College of Business and Innovation faculty members.
“Does return dispersion explain the accrual and investment anomalies?" written by Dr. Anthony Holder, Accounting Department, and Dr. Doina Chichernea and Dr. Alex Petkevich, both of the Finance Department, is now available online and will soon be featured in the printed version of the publication.
"This is great news from our accounting and finance departments," noted COBI Dean Gary Insch. "The Journal of Accounting and Economics is a top accounting journal, and Drs. Holder, Chichernea Petkevich are to be congratulated on this great accomplishment."
"This is our first time publishing in this level of journal," Dr. Holder said. "The Journal of Accounting and Economics is the consensus top accounting journal, considered an ‘A' journal by every school in the United States. Statistics actually show that in accounting, the mean, median and mode number of publications for this level of journal during one’s academic career is zero, so you can imagine how much this means for us. We worked really hard on this paper for about three years, and being published in this leading journal is affirmation that hard work and perseverance pay off."
"Furthermore," Dr. Holder said, "with all three of us being from UT, this publication really helps UT’s reputation and UT’s ability to move up in the accounting rankings in terms of research."
"Our paper is focused on the relation between accruals (an accounting variable that captures the difference between earnings and cash flows) and stock returns," Dr. Holder said. "Previous research has shown that firms with low accruals exhibit higher returns, and that trading based on accruals can provide significant profits. The most accepted explanation for this trading strategy is behavioral in nature; i.e., investors fixate on earnings and therefore do not understand the difference between cash-flows and earnings. In contrast, we show that accruals are related to the investment risk faced by the firms and that this risk varies through time with macroeconomic conditions. Our results therefore rationally explain not only why this trading strategy is profitable, but also why its profitability varies through time."
The article can currently be viewed online at http://www.journals.elsevier.com/journal-of-accounting-and-economics/recent-articles/