Load Balancing as an Optimization Problem: GSO Solution

Load rapprochement as an optimisation Problem GSO SolutionMETHODOLOGYINTRODUCTIONIn this chapter, we presented a falsehood methodological psychoanalysis which con berthrs despatch balancing as an optimization problem. A random approach, G utterworm swarm optimization (GSO) is employed to solve the above mentioned optimization problem. In the proposed method, excellent features of various fol depressive disordering ladle balancing algorithms as discussed chapter 2 argon too integrated.PROPOSED METHODOLOGYThere atomic number 18 numerous overcast figure categories. This work mainly focuses on a public denigrate. A public spoil is base on the typical cloud computing simulate, and its services provided by service provider 42. A public cloud pull up stakes comprises of some(prenominal) nodes and the nodes be in several(predicate) physical locations. smirch is sectionalizationed to manage this large cloud. A cloud consists of several cloud phonationitioning with se parately partition having its own load balancer and on that point is a main controller which manage all these partition.3.2.1 personal line of credit Assignment systemAlgorithm for assigning the jobs to cloud partition as shown in Fig. 2 tint 1 jobs arrive at the main controller measuring 2 choosing the cloud partitionStep 3 if cloud partition state is escaped or normal state henceStep 4 jobs arrive at the cloud partition balancer.Step 5 assigning the jobs to particular nodes ground on the scheme. radiation pattern 3.1 F small-scalechart of Proposed Job Assignment Strategy.Load balancing StrategyIn cloud, Load Balancing is a technique to allocate workload over one or much servers, ne twork boundary, hard drives, or new(prenominal) total visions. part datacenter holdations depends on massive, signifi spatial sex acteriort computing hardw atomic number 18 and network communications, which ar accede to the common dangers linked with any physical device, including hard w atomic number 18 split upure, power interruptions and resource limits in case of luxuriously demand.High-quality of load balance lead development the performance of the entire cloud.Though, at that place is no general occasion that croupe work in all manageable different conditions. There are several method stool been employed to solve existing problem. from for each one one specific method has its merit in a specific knowledge domain but non in all circumstances. Hence, proposed model combines various methods and inter alters among appropriate load balance methods as per system status. Here, the idle status uses an Fuzzy Logic spot the normal status uses a international swarm optimization base load balancing system.Load Balancing using Fuzzy LogicWhen the status of cloud partition is idle, several computing resources are free and comparatively few jobs are receiving. In these circumstances, this cloud partition has the cap king to deal jobs as fast as possibl e so an effortless load balancing method back end be utilise.Zadeh 12 proposed a muzzy intend theory in which the set boundaries were non precisely defined, but in fact boundaries were gradational. Such a set is characterized by continuum of grades of membership function which allocates to each object a membership grade ranging from zero to one 12. A new load balancing algorithm based on Fuzzy Logic in Virtualized environment of cloud computing is implemented to achieve better continue upon and reception clipping. The load balancing algorithm is implemented before it outstretch the bear upon servers the job is programmed based on various input parameters like depute load of Virtual Machine (VM) and central processing unit revive. It contains the schooling in each Virtual gondola (VM) and numbers of request newly assigned to VM of the system. Therefore, It blot the to the low-tonedest degree loaded machine, when a drug user request come to process its job thus it identified the first least loaded machine and process user request but in case of more than one least loaded machine available, In that case, we tried to implement the new Fuzzy logic based load balancing technique, where the dazed logic is very natural like human language by which we raft formulate the load balancing problem.The fuzzification process is carried out by fuzzifier that transforms two types of input data like assigned load and processor speed of Virtual Machine (VM) and one output as balance load which are required in the inference system shown in figure 3.2, figure 3.3 and figure 3.4 respectively. By evaluating the load and processor speed in realistic machine in our proposed work like two input parameters to produce the better appreciate to equalize the load in cloud environment, fuzzy logic is used. These parameters are taken for inputs to the fuzzifier, which are demand to estimate the balanced load as output as shown in figure 3.4.Figure 3.2 Membership input function of Processor repairFigure 3.3 Membership input function of Assigned LoadFigure 3.3 Membership output function of Balanced LoadTo affiliate the outputs of the illative rules 13 , low- last inference method is employed. A number of IF-THEN rules are de margeined by making use of the rule-based fuzzy logic to get the output response with given input conditions, here the rule is comprised from a set of semantic control rules and the containing control objectives in the system.If (processor_speed is low) and (assigned_load is least) then (balanced_load is medium)If (processor_speed is low) and (assigned_load is medium) then (balanced_load is low)If (processor_speed is low) and (assigned_load is high) then (balanced_load is low)If (processor_speed is Medium) and (assigned_load is least) then (balanced_load is high)If (processor_speed is Medium) and (assigned_load is medium) then (balanced_load is medium)If (processor_speed is Medium) and (assigned_load is high) then (balanced _load is low)If (processor_speed is high) and (assigned_load is least) then (balanced_load is high)If (processor_speed is high) and (assigned_load is medium) then (balanced_load is medium)If (processor_speed is high) and (assigned_load is high) then (balanced_load is medium)If (processor_speed is very_high) and (assigned_load is least) then (balanced_load is high)If (processor_speed is very_high) and (assigned_load is medium) then (balanced_load is high)If (processor_speed is very_high) and (assigned_load is high) then (balanced_load is medium)As shown above, there are 12 probable logical output response conclusions in our proposed work. The Defuzzification is the method of changing fuzzy output set into a single abide by and the smallest of minimum (SOM) procedure is employed for the defuzzification.The total sum of a fuzzy set comprises a undulate of output cling tos that are defuzzified in order to trace a single output value. Defuzzifier embraces the accrued semantic values from the possible fuzzy control action and produces a non-fuzzy control output, which enacts the balanced load associated to load conditions.The defuzzification process is used to evaluate the membership function for the accumulated output. The algorithm-1 is defined to manage the load in Virtual machine of cloud computing as followsBeginRequest_to_resource()L1If (resource free)BeginEstimate attributeion_string()Select fuzzy_rulebase() show resource rarityElseBeginIf (Anymore resource anchor)Select_next_resource()Go to L1ElseExitEndEndThe proposed algorithm starts with request a touch onion to resource. It tribulations for availability of resource. It guess the connection strength if the resource found. Then select the connection, which is used to admission fee the resource as per processor speed and load in virtual machine using fuzzy logic.Load Balancing using GSO (Glowworm flock Optimization)When the status of cloud partition is normal, tasks arrives with faster rate com pare to idle state and the condition becomes more complex, thus a novel system is deployed for load balancing. Each user desired his job in the shor leaven time as a result the public cloud requires a outline that set up finish the job of all users with adequate response.In this optimization algorithm, each glowworm i is distributed in the objective function business relationship topographic station 14. These glowworms transfer own luciferin values and fork out the respective reaching called local-decision order . As the glow searches in the local-decision range for the inhabit set, in the live set, glow attracted to the neighbor with brightest glow. That is glow selects neighbor whose luciferin value extensive than its own, and the relief valve direction will metamorphose each time different will change with change in selected neighbor.Each glowworm encodes the object function value at its current location into luciferin value and advertises the same in spite of appearance its neighborhood. The neighbors set of glowworm comprises of those glowworms that have comparatively a higher luciferin value and that are situated within a can-do decision range and their movements are modifyd by equation (8) at each iteration.Local-decision range update (8)and is the glowworm local-decision range at the iteration, is the sensor range, is the neighbourhood threshold, the parameter generates the rate of change of the neighborhood range. Local-decision range consist of the following number of glow (9)and, is the glowworm post at the t iteration, is the glowworm luciferin at the iteration. the set of neighbours of glowworm comprises of those glowworms that have a comparatively higher luciferin value and that are situated within a dynamic decision range whose range is defined above by a circular sensor range Each glowworm as given in equation (10), i elects a neighbor j with a chance and process toward it asProbability distribution used to se lect a neighbor (10)Movement update (11)Luciferin-update (12)and is a luciferin value of glowworm at each iteration, leads to the reflection of the accumulative goodness of the path . This path is followed by the glowworms in their ongoing luciferin values, the parameter altogether ascends the function fitness values, is the value of test function.In this optimization algorithm, each glowworm is distributed in the objective function definition space 43. These glowworms transfer own luciferin values and have the respective scope called local-decision range . As the glow searches in the local-decision range for the neighbor set, in the neighbor set, glow attracted to the neighbor with brightest glow. That is glow selects neighbor whose luciferin value great than its own, and the flight direction will change each time different will change with change in selected neighbor. Figure 3.4 shows the flowchart of GSO algorithm.In the context of load balancing for cloud computing GSO al gorithm scar the status of the server simultaneously if it is free. For example a user wants to download a file size of it of 50 MB. It checks by iteration if user gets entered in server, it gets the message as achieve target.Figure 3.4 Flowchart of GSO abbreviation of the Accrual unusual person Accounting DissertationAnalysis of the Accrual Anomaly Accounting DissertationSloan (1996), in a determinative constitution, added the collection anomalousness in the list of the grocery imperfections. Since then, academics have focused on the empiric investigation of the unusual person and the connection it has with a nonher(prenominal) misspricing phenomena. The aggregation anomalousness is clam up at an immature stage and save research is needed to hold the lucrativeness of an accretions based strategy net of achievement cost. The current vignette investigates the accretion unusual person period pickings into consideration a UK strain from 1991 to 2008. In add ition, the predictive power of the Fama and French (1996) factors HML and SMB is being tested a enormous with the industrial production growth, the dividend fail and the term structure of the interest rates.Chapter 1 inductionSince the intromission of the random walk theory which formed the nates for the evolvement of the Efficient commercialize Hypothesis (EMH hereafter) proposed by Fama (1965), the financial writings has make some advances but a piece of the puzzle that is still wanting(p) is whether the EMH holds. Undoubtedly, the aforesaid(prenominal) debate can be considered as one of the well-nigh fruitful and fast progressing financial debates of the last two decades.The Efficient Market Hypothesis has met many quarrels regardless of which of its three forms are being investigated. However, the fragile form and semi punishing surmise have been the most controversial. A literally vast collection of academic cover discuss, explore and reason out for phenomena tha t seem to reject that the financial foodstuffs are efficient.The famous label of unusual person has taken several forms. numerous well-known anomalies much(prenominal) as the contrarian investment, the post annunciation plod, the collections anomaly and many others are just the beginning of an perennial trip. There is absolutely no doubt that many more are going to be introduced and turn out for the ability for the investors to earn antidromic returns will be authenticated.Recently, academics try to expand their investigation on whether these well- entered anomalies are very lucrative due to several limitations (transaction be etc) and whether the anomalies are connected. Many newsprints are exploring the connection of the anomalies with each other proposing the population of a principal misspricing that is documented into several forms.The current study tries to look into the anomaly that was initially documented by Sloan (1996) and has been labelled as the accumu lation anomaly. The accrual anomaly can be characterised as being at an embryonic stage if the basis for comparison is the amount of publications and the dimensions of the anomaly that light has been send away on.The facts for the accrual anomaly imply the existence of the opportunity for investors to earn vicarious returns by taking advantage of simple publicly available training. On the other hand, accruals comprising an invoice figure have been approached from different points of view with consequences patent in the results of the academic papers. Furthermore, crude(a) et al (2009) challenge the actual profitability of the accrual anomaly by simply taking transaction costs into consideration.The present paper employs an accrual strategy for a sample comprising of UK firms during 1991-2008. The claim is to empirically investigate the profitability of such strategies during the whole data sample. The methodology for the calculation of accruals is largely based on the paper of Hardouvelis et al (2009). Stark et al (2009) propose that the ordained excess returns of the accruals strategy are based on the profitability of small line of descent. In order to investigate the said(prenominal) claim, the current study employs an additional strategy by constructing intersecting portfolios based on accruals and size.Finally, five variables are being investigating at the secondment part of the study for their predictive power on the excess returns of the constructed portfolios. The monolithic paper of Fama and French (1996) documented an impressive performance of two constructed variables (the returns of portfolios named HML and SMB). In addition, the dividend yield of the FTSE all share index, the industrial production growth and the term structure of the interest rates will be investigated as they are considered as potential candidates for the prediction of rip returns.Chapter 2Literature check into2.1. IntroductionDuring the last century the financial w orld has offered many real(a) advances. From the Portfolio Theory of Markowitz (1952) to the development of the Capital Asset Pricing Model of Sharpe (1964) and Lintner (1965), and from the grocery Efficient Market Hypothesis (hereafter EMH), developed by Fama (1965), to the recent literature that challenges both the CAPM and the EMH, they all seem to be a chain reaction.The financial academic world aims to give difficult but important answers on whether marts are efficient and on how investors should allocate their cash. During the last two decades, many researchers have documented that there exist strategies that challenge the claim of the agreeers of the efficient and complete markets. In this chapter, the effort will be focused on reviewing the financial literature from the birth of the liking of the EMH until the recent publications that confirm, reject or challenge it.In a determinative paper, Fama (1970) defined efficient markets and categorized them gibe to the type of information used by investors. Since then, the finance literature has offered a plethora of studies that aim to test or prove whether markets are indeed efficient or not. Well known anomalies such as the post announcement drift, the value-growth anomaly or the accruals anomaly have been the content of many articles ever since.2.2. Review of the value-growth anomalyWe consider as adjuvant to review the literature for the value growth-anomaly since it was one of the first anomalies to be investigated in such an design. In addition, the research for the value-growth anomaly has yielded a largely creative debate on whether the documented returns are due to higher take a chance or other source of mispricing.Basu (1970) terminated that investment trusts with high Earnings to determine ratio tend to overstep standards with low E/P. Lakonishok, Shleifer and Vishny (1994) documented that stocks that step forward to have low harm to a fundamental (book value, kale, dividends etc ) can outperform stocks with high expenditure to a fundamental measure of value. Lakonishok, Shleifer and Vishny (1994) initiated a nut-bearing period that aimed to settle the dispute on the EMH and investigate the suffers of such anomalies.Thus, the aforementioned researchers sparked the debate not only on the market efficiency system but as well as on what are the sources for these phenomena. Fama and French (1992) supported the estimation that certain stocks outperform their counterparts due to the big risk that the investors bear. Lakonishok, Shleifer and Vishny (1994) supported the motif that investors fail to correctly react to information that is available to them. The same idea was supported by many researchers such as Piotroski (2001). The latter also constructed a score in order to categorise stocks with high B/M that can yield positive brachydactylous returns (namely, the F Score). Additionally, the market efficiency debate drove behavioural finance to rise in po pularity.The value-growth phenomenon has yielded many articles that aim to find evidence that a utile strategy is feasible or trace the sources of these profits but, at the same time, the main approach adopted in each study varies substantively. Asness (1997) and Daniel and Titman (1999) date the price momentum, while Lakonishok, Sougiannis and Chan (2001) show the sham of the value of intangible assets on surety returns.In addition, researchers have found evidence that the value-growth strategies tend to be prospering worldwide, as their results declare oneself. To name a few, Chan, Hamao and Lakonishok (1991) focused on the Japanese market, present and Veld (1995) based their research on France, Germany and the Netherlands and Gregory, Harris and Michou (2001) examined the UK stock market.It is worth mentioning that only if the evidence of such profitable strategies could be sufficient to draw the prudence of practitioners, but academics are additionally interested in exploring the main cause of these arising opportunities as well as the traffichip betwixt the aforementioned phenomena (namely, the value growth, post announcement drift and the accrual anomaly). In general, two schools of horizon have been developed the one that supports the risk based explanation or, in other words, that stocks yield higher returns simply because they are riskier, and the one that supports that investors fail to recognise the correct signs included in the available information.2.3. The accruals anomaly2.3.1. Introduction of the accrual anomaly.Sloan (1996) documented that firms with high (low) accruals tend to earn negative (positive) returns in the following year. Based on this strategy, a profitable portfolio that has a tenacious get on stocks with low accruals and short position on stocks with high accruals yields approximately 10% abnormal returns. According to Sloan (1996) investors tend to overreact to information on current kale. Sloans (1996) seminar paper has been characterised as a tillable work that initiated an interesting to follow debate during the last decade. It is worth noting that notwithstanding the very recent literature on the accrual anomaly has not reached reconciling conclusion about the main causes of this particular phenomenon and about whether a trading strategy (net of transaction costs) based solely on the mispricing of accruals can be systematically profitable.At this point it is worth mentioning that the accruals have been found to be statistically significant and negative to predict future stock returns. On the other hand, there are papers that examine the accruals and its sexual relations with the aggregate market. A simple example is the paper publish by Hirshleifer, Hou and Teoh (2007), who aim to identify the relation of the accruals, if any, with the aggregate stock market. Their findings support that while the operating accruals have been found to be a statistical significant and a negative pre dictor of the stock returns, the relation with the market portfolio is strong and positive. They support that the sign of the accruals coefficient varies from industry to industry reaching a glance when the High Tech industry is taken into account (1.15), and taking a negative value for the Communication and Beer/Liquor industry.2.3.2 conclusion for the international straw man of the phenomenon.Researchers that investigated the accruals anomaly followed different approaches. At this point, it is worth noting that the evidence shows the accrual anomaly (although it was first found to be present in the US market) to exist worldwide. Leippold and Lohre (2008) examine the accrual anomaly within an international framework. The researchers document that the accrual anomaly is a fact for a plethora of markets.The contribution of the paper though, is the large and complete number of tests used, so that the possibility of pure randomness would be eliminated. Although, similar tests showe d that momentum strategies can be profitable, recent methodologies used by the researchers and proposed by Romano and Wolf (2005) and Romano, Shaikh and Wolf (2008), suggest that the accruals anomaly can be partially random.It is noteworthy that the additional tests make the anomaly to fade out for almost all the samples apart from the markets of US, Australia and Denmark. Kaserer and Klingler (2008) examine how the over-reaction of the accrual information is connected with the accounting standards applied. The researchers constructed their sample by solely German firms and their findings document that the anomaly is present in Germany too. We should mention at this point that, interestingly, prior to 2000, that is prior to the adoption of the international accounting standards by Germany, the evidence did not support the existence of the accrual anomaly. However, during 2000-2002, Kaserer and Klingler (2008) found that the market overreacted to accrual information. Hence, the autho rs support the idea that an additional cause of the anomaly is the lack of healthy mechanisms to enforce the preparation of the financial statements according to the international accounting standards which major power gave the opportunity to the firms to keep in line their gain.Another paper that focuses on the worldwide front line of the accruals mispricing is that of Rajgopal and Venkatachalam (2007). Rajgopal and Venkatachalam examined a total of 19 markets and found that the particular market anomaly exists in Australia, UK, Canada and the US. The authors primal goal was to identify the strike drivers that can realise the markets where the anomaly was documented. Their evidence supports the idea that an accrual strategy is favoured in countries where there is a common law tradition, an extensive accrual accounting and a low concentration of firms ownership combined with weak shareholders rights.LaFond (2005) also considers the existence of the phenomenon within a global framework. The authors findings support the sentiment that the accrual anomaly is present worldwide. In addition, LaFond argues that there is not a unique driving factor responsible for the phenomenon across the markets. It is worth noting that LaFond (2005) documented that this particular market imperfection is present in markets with diverse methodology of accrual accounting. Findings are against the idea that the accrual anomaly has any relation with the level of the shareholders protection or a common law tradition, as suggested by Rajgopal and Venkatachalam (2007). Finally, the author suggests that, if any, it is not the different method of accrual accounting (measurement issues) that favours or eliminates the accrual anomaly, but the accrual accounting itself.2.3.3. Further test for the roots of the accruals anomaly.Additionally, papers such as those of doubting Thomas and Zang (2002) or Hribar (2000) crumble accruals into changes in different items (such as inventory, acco unts payable etc). The findings catholically suggest that extreme changes in inventory affect returns the most. On the other hand, many articles connect the accruals with information used by investors, such as the behaviour of insiders or analysts, as the latter can be considered a major signal to the investors for a potential manipulation of the firms figures.In particular, Beneish and Vargus (2002) documented that firms with high accruals and significant insider merchandising have substantial negative returns.Bradshaw (2001) and Barth and Hutton (2001) examine the analysts reports and their relation with the accruals anomaly. Their findings support that the analysts prognostic error tends to be larger for firms with high accruals, while analysts do not revise their forecasts when new information for accruals is available.Gu and Jain (2006) decompose accruals into changes in inventory, changes in accounts receivable and payable and depreciation expenses and try to identify the imp act of the individual components to the anomaly. Consistent with Sloan (1996), Gu and Jain (2006) document that the accrual anomaly exists at the components level. The findings are important since Desai et al (2004) supported the connection of the accrual anomaly with a single variable (cash flows from operations). The researchers suggest that the results yielded by Desai et al (2004) were passing dependent on the methodology used and thus, suggested that the accruals anomaly is existing and well.Moreover, other articles try to confirm whether the anomaly is mainly caused by the wrong interpretation of the information contained in accruals. Ali et al. (2000), investigate whether the nave investors hypothesis holds. Following the methodology introduced by Hand (1990) and Walther (1997), they found that for smaller firms, which are more likely to be followed by cultivate investors, the relation between accruals and negative future returns is weaker compared to larger firms, which a re followed by many analysts. Therefore, the researchers suggest that, if anything, the nave investors hypothesis does not hold. In contrast to other market anomalies where findings suggest that the nave investors hypothesis holds, the accruals anomaly is suggested as unique.Shi and Zhang (2007) investigate the lolly regression toward the mean hypothesis suggesting that the accruals anomaly is based on the investors fixation or obsession on earnings. Their primal hypothesis is that if investors are highly based on the reports about earnings and misprice the value-relevant earnings, then the returns should be dependent not only on the accruals but also on how the stocks price changes according to reported earnings.The researchers hypothesis is confirmed and finding support that an accrual strategy for firms whose stocks price highly fluctuates according to earnings yields a 37% annual return. Sawicki and Shrestha (2009) aim to examine two possible explanations for the accruals anoma ly. Sloan (1996) proposed the fixation theory under which investors fixate on earnings and thus overvalue or undervalue information for accruals.Kothari et al. (2006) proposed the agency theory of overvalued equity according to which managers of overvalued firms try to prolong the period of this overvaluation which causes accruals to increase.The paper uses the insider trading and other firm characteristics and tries to compare and contrast the two major explanations. Evidence produces bd Sawicki and Shrestha (2009) support the Kothari et al. (2006) explanation for the accrual anomaly. In a relatively different in motif paper, Wu and Zhang (2008) examine the role that the drop rate rates play in the accrual anomaly.They argue that if anything, the anomaly is not caused by irrationality from the investorsside but by the rationality of firms as it is proposed by the q-theory of investment. They argue that since the discount rates fall and more projects become profitable (which make s accruals to increase) future stock returns should decline. In other words, if the capital investment correctly adjusts to the current discount rates, the accruals should be negatively cor connect with the future returns and positively correlated with the current returns. The evidence of Wu and Zhang (2008) support that the accruals are negatively correlated with the future stock returns but the contribution of the paper is in that they document that current stock returns are positively correlated with the accruals.2.3.4. The relation of the accrual anomaly with other market imperfections.Many papers examine the relation between the accruals anomaly and other well-known anomalies such as the post announcement drift or the value-growth phenomenon. Desai et al. (2002), suggest that the value-growth anomaly and the accruals anomaly basically interact and conclude that the accruals strategy and the C/P reflect the same underlying phenomena. collins and Hribar (2000) suggest that there in no link between the accruals anomaly and the PAD, while Fairfield et al. (2001) support that the accruals anomaly is a sub-category of an anomaly caused by the mistaken interpretation of the information about growth by the investors.subgenus Cheng and Thomas (2006) examine the claim that the accrual anomaly is a part of a broader anomaly (and more specifically, the value-glamour anomaly). Prior literature suggested that the operating cash flows to price ratio subordinates accruals in explaining future stock returns (Deshai et al (2004)). Their evidence suggests that the operate CF to price ratio does not subsume neither abnormal nor total accruals in future announcement returns. This particular result does not confirm the claim that the accrual anomaly is a part of a broad value-glamour anomaly.Atwood and Xie (2005) focus on the relation of the accrual anomaly and the mispricing of the particular items first documented by Burgstahler, Jiambalvo and Shevlin (2002). Their hypothe sis that the two phenomena are highly related is confirmed since the researchers found that special items and accruals are positively correlated. Additionally, further tests yielded results that suggest that the two imperfections are not distinct, while the special items have an impact on how the market misprices the accruals.Louis and Sun (2008) aim to assess the relation between the abnormal accrual anomaly and the post earnings announcement drift anomaly. The authors hypothesize that both anomalies are related to the management of the earnings and thus, they aim to find whether the two are button uply connected. The findings are uniform with the primal hypothesis, as they found that firms with large positive change of earnings that were least likely to have manipulated earning downwards did not suffer from PEAD, while the same result was yielded for firms that had large negative change of earnings that were least likely to have managed their earnings upwards.As supported by man y researchers the value-growth anomaly and accruals anomaly major power be closely related or they might blush be caused by the similar or crimson identical roots.Fama and French (1996) support that the book to market factor captures the risk of default, while Khan (2008) suggests that in a similar pattern firms with low accruals have a larger possibility to bankrupt. Therefore, many researchers try to connect the two phenomena or to answer whether a strategy based on the accruals can offer more than what the value growth strategy offers.Hardouvelis, Papanastopoulos, Thomakos and Wang (2009) connect the two anomalies by assessing the profitability of interacting portfolios based on the accruals and value-growth measures. Their findings support that positive returns are obtainable and magnified when a long position is held for a portfolio with low accruals while combined with stocks that are characterised as high market to book. The difference of a risked-based explanation or an i mperfection of the markets is considered to be a major debate, as it can challenge the market efficiency hypothesis.Many researchers, such as Fama and French (1996) noted that any potential profitable strategy is simply due to the higher risk that the investors have to bear by holding such portfolios. In a similar way, the profitable accruals strategies are considered as a compensation for a higher risk. Stocks that yield larger returns are compared or labelled as stocks of firms that are close to a financial distress. Khan (2000) aims to confirm or reject the risk-based explanation of the accruals anomaly.The researcher uses the ICAPM in order to test if the risk captured by the model can explain the anomaly first documented by Sloan (1996). It is worth noting that the descriptive statistics results for the sample used showed that firms that had low accruals also had high unsuccessful person risk.The contribution of the paper is that, by proposing a four factor model enhanced by r ecent asset pricing advances, it showed that a great portion of the mispricing that results in the accrual anomaly can be explained within a risk-based framework. Furthermore, Jeffrey Ng (2005) examines the risk based explanation for the accrual anomaly which proposes that accruals include information for financial distress.As proposed by many papers, the accrual anomaly is simply based on the fact that investors bare more risk and thus low accrual firms have positive abnormal returns. The researcher tries to examine how and if the abnormal returns of a portfolio which is short on low accruals stocks and long on high accrual firms changes when controlling for distress risk. Evidence supports that at least a part of the abnormal returns are a compensation for bearing additional risk. Finally, the results support that the big portion of the high abnormal returns of the accrual strategy used in the particular paper is due to stocks that have high distress risk.2.3.5. The accruals anoma ly and its relation with firms characteristics.A noteworthy part of the academic literature examines the existence of some key characteristics or drivers that are highly correlated with the accruals anomaly. Many researchers have published papers that aim to identify the impact of firm characteristics such as the size of the firm, characteristics that belong to the broader environment of the firms such as the accounting standards or the power of the minority shareholders. Zhang (2007) investigates whether the accrual anomaly varies cross-sectionally while being related with firms specific characteristics. The researcher primarily aims to explain which the main reason for the accrual anomaly is.As Zhang (2007) mentions, Sloan (1996) attributes the accrual anomaly to the overestimation of the persistence of accruals by investors, while Fairfield (2003) argues that the accrual anomaly is a special case of a wider anomaly based on growth. The evidence supports the researchers hypothesis that characteristics such as the covariance of the employee growth with the accruals have an impact on the future stock returns. Finally, Zhang (2007) documents that that accruals co-vary with investment in fixed assets and external financing.Louis, Robinson and Sbaraglia (2006) examine whether the non-disclosure of accruals information can have an impact on the accruals anomaly. The researchers, dividing their sample into firms that demote accruals information on the earnings announcement and firms that do not, investigate whether there exists accruals mispricing. The evidence supports that for firms that disclose accruals information, the market manages to correctly understand the discretionary part of the change of the earnings.On the contrary, firms that do not disclose accruals information are found to experience a correction on their stock price. put up and Paynes (2008) primal aim is to examine the relation of the accrual anomaly and the auditing quality. The researchers h ypothesis is that the accruals mispricing is related with the quality of auditing.Additionally, their findings support that the stock prices do not reflect the accruals persistence characterising the lower-quality audit firms. Finally, their empirical work finds that the returns are greater for the lower-quality audit portfolio of firms.Palmon, Sudit and Yezegel (2008) examine the relation of the accruals mispricing and the company size. Evidence shows that company size affects the returns and, as the researchers documented, the negative abnormal returns are mostly due to larger firms while the positive abnormal returns come from the relatively small firms. Particularly, as the strategy with the highest profits they found the one that had a short position in the largest-top-accrual decile and a long position in the smallest-low-accrual decile.Bjojraj, Sengupta and Zhang (2009) examine the introduction of the Sarbanes-Oxley Act and the FAS 146 and how these two changes affected the a ccrual anomaly. FAS 146 (liabilities are recognized only when they are incurred) reduced the companys ability to manipulate earnings while the SOX aims to enhance the credibility of the financial statements. The evidence recognises a change on how the market conceives information about restructurings charges. The authors propose that a possible explanation is that before the introduction of SOX and the FAS 146, the market was reluctant due to the ability of the firms to manage earnings. Finally, Bjojraj, Sengupta and Zhang (2009) document that post to the FAS 146 and the SOX act, low accrual portfolios do not generate positive abnormal returns.2.4. The applications of the accruals phenomenon and reasons wherefore it is not traded away.The importance of the analysis of the anomalies is substantial for two reasons. Firstly, the profitability of a costless strategy challenges the EMH, in particular if the strategy is based on bearing no additional risk. Secondly, managers incentives to manipulate the financial statements and consequently the accruals would be obvious if a profitable strategy based on such widely available information existed. Chen and Cheng (2002) find that the managers incentive to record abnormal accruals is highly correlated with the accrual anomaly. The hypothesis of the researchers, which their findings support, was that the investors fail to detect when the managers aim to record abnormal accruals and that whitethorn contribute to the accruals anomaly.Richardsons (2000) main objective is to examine whether the information contained in the accruals is utilized by short sellers. As the researcher mentions, previous articles such as that of Teoh and Wong (1999) found that sell side analysts were unable to correctly work the information contained in accruals for future returns. Richardson suggests that short sellers are considered as sophisticated enough to utilize the accruals information. Findings confirm previous work, such as that of Sl oan (2000), who suggests that even short sellers do not correctly utilize the information contained into accruals.Ali, Chen, Yao and Yu (2007) examine whether and how equity cash in hand benefit from the accrual anomaly by taking long position into low accruals firms. The researchers aim to identify how exposed are the equity firms to such a well known anomaly and what characteristics these funds share. By constructing a measure called accruals investing measure (AIM), they try to document the portion of the low accruals firms into the actively managed funds. The evidence shows that generally funds are not widely exposed to low accruals firms but when they do so, they have an average of 2.83% annual return. It is worth noting that the annual return is net of transaction costs.Finally, the side-effects of high volatility in returns and in fund flows of the equity funds that are partially based on the accrual anomaly might be the reason behind the reluctance of the managers. Soares a nd Stark (2009) used UK firms to test whether a profitable accrual strategy is feasible net of transactions costs. Their findings support that indeed the accrual anomaly is present in the UK market. The authors suggest that for such a strategy to be profitable, someone is required to alternate on firms with small market capitalization. They also suggest that although the accruals mispricing seems to exist also in the UK, the transaction costs limit the profits to such an extent that the accrual anomaly could be difficult characterised as a challenge to the semi strong form of the efficient market hypothesis.Finally, we should not inadvertence to mention two papers that discourse on why the markets do not simply correct the accruals anomaly. According to the classical theory, markets are so imperfect that can produce the incentive to the market to correct the anomalies at any point of time. Mashruwala, Rajgopal and Shevlin (2006) examined the transactions costs and the idiosyncrat ic risk as possible reasons of why the accrual anomaly is not arbitraged away. The researchers aimed to investigate why the market does not correct the anomaly, but also to identify whether the low accruals firms are riskier. The paper poses the question of what stops the informed investors from taking long positions into profitable stocks according to the accrual anomaly so that they can arbitrage it away. The paper examines the practical difficulty of finding substitutes so that the risk can be minimized and its relation with the accrual anomaly. Additionally, the paper investigates the transaction costs and findings support that according to the accrual anomaly, the profitable stocks tend to be the ones with low stock prices and low trading volume.Lev and Nissim (2004) focus on the persistence of the accr