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Are accruals mispriced Evidence from tests of an Intertemporal Capital Asset Pricing Model

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  • Khan, Mozaffar

Abstract

This paper proposes a risk-based explanation for the accrual anomaly. Risk is measured using a four-factor model motivated by the Intertemporal Capital Asset Pricing Model. Tests of the model suggest that a considerable portion of the cross-sectional variation in average returns to high and low accrual firms is explained by risk. The four-factor model also performs better than some other widely used models in pricing a number of different hedge portfolios.

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  • Khan, Mozaffar, 2008. "Are accruals mispriced Evidence from tests of an Intertemporal Capital Asset Pricing Model," Journal of Accounting and Economics, Elsevier, vol. 45(1), pages 55-77, March.
  • Handle: RePEc:eee:jaecon:v:45:y:2008:i:1:p:55-77
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