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There are two very different accruals anomalies

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  • Andrew Detzel
  • Philipp Schaberl
  • Jack Strauss

Abstract

We document that several well‐known asset‐pricing implications of accruals differ for investment and non‐investment‐related components. Exposure to an investment‐accruals factor explains the cross‐section of returns better than accruals themselves, and sentiment negatively predicts this factor's returns. The opposite results hold for non‐investment accruals. Cash profitability only subsumes long‐term non‐investment accruals in the cross‐section of returns and economy‐wide investment accruals negatively predict stock‐market returns while other accruals do not. These results challenge existing accruals‐anomaly theories and resolve mixed evidence by showing the anomaly is two separate phenomena: a risk‐based investment accruals premium and a mispricing of non‐investment accruals.

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  • Andrew Detzel & Philipp Schaberl & Jack Strauss, 2018. "There are two very different accruals anomalies," European Financial Management, European Financial Management Association, vol. 24(4), pages 581-609, September.
    • Handle: RePEc:bla:eufman:v:24:y:2018:i:4:p:581-609
    DOI: 10.1111/eufm.12162
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    Cited by:

    1. Prodosh Simlai, 2021. "Accrual mispricing, value-at-risk, and expected stock returns," Review of Quantitative Finance and Accounting, Springer, vol. 57(4), pages 1487-1517, November.

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