Accruals, Net Stock Issues and Value-Glamour Anomalies: New Evidence on their Relation

In this paper we investigate the relation of the anomalies on accruals and net stock issues with the value/glamour anomaly. Our findings reveal, that hedge strategies on retained earnings, total accruals, net operating assets (accrual proxies), cash distributions to equity holders (net stock issues proxy), past sales growth, book to market ratio and free cash flow yield (value/glamour proxies) constitute statistical arbitrage opportunities. We also find that the generated abnormal returns from hedge strategies that combine information on retained earnings (and on other accrual proxies) or cash distributions to equity holders and value/glamour proxies are significantly higher than those from each proxy alone. Thus, if one agrees that the notion of statistical arbitrage is incompatible with market efficiency our evidence suggests that the anomalies on accruals and net stock issues capture distinct forms of mispricing with the value glamour anomaly. Alternatively, our evidence suggests the specification of a broader set of risk factors to existing asset pricing models.