We investigate institutional investors' trading behavior of acquiring firm stocks surrounding merger activities for the period 1992 to 2001. We label investment companies and independent investment advisors as active institutions and banks, nonbank trusts and insurance companies as passive...

We document considerable return comovement associated with accruals after controlling for other common factors. An accrual-based factor-mimicking portfolio has a Sharpe ratio of 0.16, higher than that of the market factor or the SMB and HML factors of Fama and French (1993). According to...