What do we learn from two new accounting-based stock market anomalies?

Hirshleifer et al. (J. Account. Econom. 38 (2004)) and Taffler, Lu and Kausar (J. Account. Econom. 38 (2004)) document large and statistically significant abnormal returns from trading on balance sheet data and audit opinions. However, the statistical tests ignore high transactions costs, especially for selling short, that would likely make the trading strategies unprofitable. The accounting anomalies literature is adding little to what we know about how and why markets operate more or less efficiently. I identify some research questions and opportunities, highlighting those with accounting and auditing implications. (C) 2004 Elsevier B.V. All rights reserved.