Abstract

http://ssrn.com/abstract=911587
 
 

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Is Accruals Quality a Priced Risk Factor?


John E. Core


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Wayne R. Guay


University of Pennsylvania - Accounting Department

Rodrigo S. Verdi


Massachusetts Institute of Technology (MIT)

December 13, 2007


Abstract:     
In a recent and influential empirical paper, Francis, LaFond, Olsson, and Schipper (2005) conclude that accruals quality (AQ) is a priced risk factor. We explain that FLOS' regressions examining a contemporaneous relation between excess returns and factor returns do not test the hypothesis that AQ is a priced risk factor. We conduct appropriate asset-pricing tests for determining whether a potential risk factor explains expected returns, and find no evidence that AQ is a priced risk factor.

Number of Pages in PDF File: 50

Keywords: Asset pricing tests, Accruals quality, Information risk, Portfolio theory and diversification

JEL Classification: D80, G11, G12, M41

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Date posted: June 28, 2006 ; Last revised: November 16, 2011

Suggested Citation

Core, John E. and Guay, Wayne R. and Verdi, Rodrigo S., Is Accruals Quality a Priced Risk Factor? (December 13, 2007). Available at SSRN: http://ssrn.com/abstract=911587 or http://dx.doi.org/10.2139/ssrn.911587

Contact Information

John E. Core (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02138
United States
Wayne R. Guay
University of Pennsylvania - Accounting Department ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7775 (Phone)
215-573-2054 (Fax)

Rodrigo S. Verdi
Massachusetts Institute of Technology (MIT) ( email )
Sloan School of Management
100 Main Street E62-679
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)
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