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Do mutual funds exploit the accrual anomaly?: Korean evidence

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  • Kim, Young Jun
  • Lee, Joonil
  • Lee, Su Jeong
  • Sunwoo, Hee-Yeon

Abstract

Using a unique dataset on mutual fund holdings and fund returns during the period of 2003 to 2015, this study investigates whether Korean mutual funds exploit the accrual anomaly. Our findings are summarized as follows. First, we find that the top 10% of mutual funds with the highest weights on low-accrual stocks (“low-accruals strategy funds”) have significantly greater exposure to low accruals stocks. However, this low-accruals strategy does not seem to be the result of an intentional selection of stocks with low accruals as the lower level of accruals is not maintained in subsequent years. Second, we find that returns of the low-accruals strategy funds are statistically insignificant after accounting for risk factors and characteristics of fund holdings. Taken together, in contrast to U.S. mutual funds, we find no evidence that Korean mutual funds exploit the accrual anomaly. Our findings suggest that even sophisticated investors in emerging markets may not use academic findings in their portfolio choices.

Suggested Citation

  • Kim, Young Jun & Lee, Joonil & Lee, Su Jeong & Sunwoo, Hee-Yeon, 2017. "Do mutual funds exploit the accrual anomaly?: Korean evidence," Pacific-Basin Finance Journal, Elsevier, vol. 46(PB), pages 227-242.
    • Handle: RePEc:eee:pacfin:v:46:y:2017:i:pb:p:227-242
    DOI: 10.1016/j.pacfin.2017.09.008
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    Cited by:

    1. Liu, Xiaoming & Shen, Xieyang & Wang, Changyun & Zeng, Jianyu, 2023. "Do fund managers' tones predict future performance? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    2. Muhammad Sali Maheen, 2021. "Impact of COVID-19 on the performance of emerging market mutual funds: evidence from India," Future Business Journal, Springer, vol. 7(1), pages 1-8, December.

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    More about this item

    Keywords

    Accrual anomaly; Mutual funds; Market efficiency; Korean stock market;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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