In this study, I examine whether the pricing of book-tax differences reflects mispricing or a priced risk factor. I provide new evidence that temporary book-tax differences are mispriced by developing portfolios that trade on the information in book-tax differences for future accruals and cash flows. I develop and test predictions on whether book-tax difference mispricing is the value-glamour anomaly in disguise. Both signals of mispricing relate to firm growth and, thus, both may capture mispricing due to over-extrapolation of realized growth to future growth. I find that the book-tax difference pricing anomaly is subsumed by the value-glamour anomaly. Specifically, trading on the information in book-tax differences does not yield incremental returns relative to a value-glamour trading strategy. Hence, mispricing associated with book-tax differences relates more generally to the mispricing of expected growth as extrapolated from past growth.
Identifer | oai:union.ndltd.org:uiowa.edu/oai:ir.uiowa.edu:etd-6440 |
Date | 01 May 2016 |
Creators | Hepfer, Bradford Fitzgerald |
Contributors | Collins, Daniel W., Gleason, Cristi A. |
Publisher | University of Iowa |
Source Sets | University of Iowa |
Language | English |
Detected Language | English |
Type | dissertation |
Format | application/pdf |
Source | Theses and Dissertations |
Rights | Copyright 2016 Bradford Fitzgerald Hepfer |
Page generated in 0.0018 seconds