Accruals quality, stock returns and asset pricing: Evidence from the UK

Sulaiman Mouselli, Aziz Jaafar () and John Goddard

International Review of Financial Analysis, 2013, vol. 30, issue C, 203-213

Abstract: The extent to which accruals quality (AQ) is relevant for asset pricing has been debated widely. Prior research in this area has focused almost exclusively on the US. Using UK data, we investigate whether AQ portfolios exhibit evidence of significant mispricing, and whether an AQ factor is useful in explaining the portfolios' returns. We also investigate whether AQ is a priced risk factor. Using a two stage cross-sectional regression, we show that an AQ measure explains the cross-section of stock returns. AQ also explains the time-series variation in returns for two sets of portfolios: 16 size-BM portfolios, and 20 industry portfolios. Consistent with some recent US evidence, however, we find no evidence that AQ is a priced risk factor for UK stocks.

Keywords: Accruals quality; Asset pricing; Information risk; Stock returns (search for similar items in EconPapers)
JEL-codes: G12 M41 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:30:y:2013:i:c:p:203-213

DOI: 10.1016/j.irfa.2013.08.006

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