There are Two Very Different Accruals Anomalies

43 Pages Posted: 15 Nov 2017

See all articles by Andrew L. Detzel

Andrew L. Detzel

Baylor University - Hankamer School of Business

Philipp D. Schaberl

University of Northern Colorado - Monfort College of Business

Jack Strauss

University of Denver - Daniels College of Business

Date Written: November 12, 2017

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 the accruals themselves, and this factor’s returns are negatively predicted by sentiment. The opposite results hold for non-investment accruals. Further tests show 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 help resolve mixed evidence by showing that the anomaly is two separate phenomena: a risk-based investment accruals premium and a mispricing of non-investment accruals.

Keywords: Accruals Anomaly, Profitability, Real Investment, Cross-section of Stock Returns

JEL Classification: E44, G12

Suggested Citation

Detzel, Andrew L. and Schaberl, Philipp D. and Strauss, Jack, There are Two Very Different Accruals Anomalies (November 12, 2017). Available at SSRN: https://ssrn.com/abstract=3069688 or http://dx.doi.org/10.2139/ssrn.3069688

Andrew L. Detzel (Contact Author)

Baylor University - Hankamer School of Business ( email )

Waco, TX 76798
United States

HOME PAGE: http://andrewdetzel.com

Philipp D. Schaberl

University of Northern Colorado - Monfort College of Business ( email )

Kepner Hall
800 17th Street
Greeley, CO 80639
United States

Jack Strauss

University of Denver - Daniels College of Business ( email )

2101 S. University Blvd.
Denver, CO 80208
United States

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