There are two very different accruals anomalies

Andrew Detzel, Philipp Schaberl and Jack Strauss

European Financial Management, 2018, vol. 24, issue 4, 581-609

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 accruals themselves, and sentiment negatively predicts this factor's returns. The opposite results hold for non‐investment accruals. 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 resolve mixed evidence by showing the anomaly is two separate phenomena: a risk‐based investment accruals premium and a mispricing of non‐investment accruals.

Date: 2018
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