Value-Glamour and Accruals Mispricing: One Anomaly or Two?

Abstract

We investigate whether the accruals anomaly documented by Sloan (1996) in the accounting literature is distinct from the value-glamour anomaly documented in the finance literature. We find that the accruals strategy earns abnormal returns incremental to past sales growth, book-to-market and earnings-to-price proxies of value-glamour. However, after controlling for the cash flow-to-price ratio, we do not observe any relation between accruals and future abnormal returns. Hence, it appears that the mispricing attributed to accruals is a manifestation of mispricing related to the cash flow-to-price proxy of the value-glamour phenomenon.

JEL Classification: G14, M41