Abnormal Accrual, Informed Trader, and Long-Term Stock Return: Evidence from Japan


This study examines the association among abnormal accruals, long-term stock returns, and probability of informed trading. Some analytical and empirical research for postearnings announcement drift provide evidence that a high arrival rate of informed traders helps stock prices become more efficient. We focus on the abnormal accrual anomaly, and investigate these studies' implications using data from the Tokyo Stock Exchange in Japan. Consistent with these studies, we show that stocks with a high probability of informed trading exhibit less abnormal accrual mispricing relative to stocks with a low probability of informed trading.

Keywords: Abnormal accruals, Market microstructure, High-frequency data, Informed trader

Katsuhiko MURAMIYA
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059

Kazuhisa OTOGAWA
Graduate School of Economics, Kobe University

Graduate School of Economics, Kobe University