An article published in the accounting review, sloan (1996) decomposed net income into accruals and operating cash flows and compared the relative magnitudes of their persistence.

a. sloan found that operating cash flows have a higher persistence than accruals. briefly explain one reason why operating cash flows have higher persistence than accruals.

b. sloan also found that the stock price of firms in his sample increased in response to good news and decreased in response to bad news in terms of net income. but the magnitude of this stock price response did not vary with the relative proportions of accruals and operating cash flows that constituted net income.

explain why this phenomenon is an example of an efficient market anomaly.

explain why the anomaly continues to exist even though 15 years have elapsed since it was first recorded by sloan. provide one explanation.