Are Accruals Mispriced? Evidence from Tests of an Intertemporal Capital Asset Pricing Model
46 Pages Posted: 15 Sep 2004
Date Written: June 2007
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.
Keywords: Accruals, mispricing, market efficiency, risk, anomaly.
JEL Classification: G12, G14, M41, M43
Suggested Citation: Suggested Citation