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Reexamination of Whether Accrual Quality Is a Price Factor

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  • May Xiaoyan Bao
  • Xiaoyan Cheng
  • John Geppert
  • David B. Smith

Abstract

In this study we investigate whether accrual quality is a factor in capital asset pricing. Our analysis consists of two parts. First, we use a panel data regression that controls for cross-section fixed effects to implement the second stage of the Fama-MacBeth regression (Petersen 2009). In the second part, we use the Campbell (1991) return decomposition and vector autoregressive model (VAR) to decompose the two-stage cross-sectional regressions. This allows us to investigate whether accrual quality is a priced factor in terms of the three components of the return, which include one-period expected return, cash flow news and discount-rate news.Â

Suggested Citation

  • May Xiaoyan Bao & Xiaoyan Cheng & John Geppert & David B. Smith, 2019. "Reexamination of Whether Accrual Quality Is a Price Factor," Accounting and Finance Research, Sciedu Press, vol. 8(3), pages 103-103, August.
    • Handle: RePEc:jfr:afr111:v:8:y:2019:i:3:p:103
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    References listed on IDEAS

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    1. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
    2. David Aboody & John Hughes & Jing Liu, 2005. "Earnings Quality, Insider Trading, and Cost of Capital," Journal of Accounting Research, Wiley Blackwell, vol. 43(5), pages 651-673, December.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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