Event#127tier 1live in productionNew

`item 402 non reliance`

cadence: Dailydata: mediumshort only

2008

Hennes, K. M., Leone, A. J., Miller, B. P. (2008). "The Importance of Distinguishing Errors from Irregularities in Restatement Research." The Accounting Review, 83(6), 1487-1519. Also GAO-03-138 (2003) "Financial Statement Restatements."

Read the paper →

What it checks

When a company files an 8-K Item 4.02 saying its old financials shouldn't be trusted, the stock drops 8-15% in 3 days.

Mechanism

8-K Item 4.02 = "Non-Reliance on Previously Issued Financial Statements" — a restatement is coming. Hennes et al: -8% to -15% in 3-day window, drift continues 60-90d. Sparse but exceptionally clean.

No production champion data for this family yet. Stats appear once the discovery pipeline promotes at least one strategy with this family tag.

Signal rule

short on Item 4.02 filing date; hold 10/30/60/90 days

Data dependencies

sec_8k_events
Item-coded 8-K events (1.01 material agreements, 4.02 non-reliance, etc.).
daily_prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Paper alpha: -8% to -15% in 3d
Paper window: T+0 to T+90d

Hennes-Leone-Miller 2008: -8% to -15% in 3d, drift 60-90d. Reversal after 6+ months as details land.

Example tickers where this is likely to fire

LCID PLTR RIVN

Illustrative only — the signal fires based on the live data, not a fixed list.

Related families

item 502 executive departureEvent

8-K Item 5.02 (Departure/Appointment of Officers). Fee et al find ~-3% abnormal return on the 8-K filing window, holding through 60d. Forced departures stronger (-5% to -15%).

beneish m score shortQuality

Beneish (1999, FAJ) built an 8-variable logistic-style index that flags firms likely to be manipulating earnings (DSRI, GMI, AQI, SGI, DEPI, SGAI, LVGI, TATA). M > -1.78 → manipulator suspect. Beneish-Lee-Nichols 2013 FAJ confirm OOS the score predicts both SEC enforcement actions and forward underperformance. Used inside AQR's quality-minus-junk composite. Short-bias only — long-side from very-negative M is historically noisy.

sloan accrualsAccounting

Earnings persistence is much lower in firms with high accruals. Going long low-accrual and short high-accrual delivers ~10% annualized over 1962-1991 (Sloan 1996, Accounting Review). Richardson-Sloan-Soliman-Tuna (2005, JAE) refined the measure to a broader balance-sheet accrual definition. Status (2024 replication consensus): alive in small caps, faded in large caps post-2003.

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item 402 non reliance