Is accruals quality a priced risk factor?

John E. Core, Wayne R. Guay and Rodrigo Verdi

Journal of Accounting and Economics, 2008, vol. 46, issue 1, 2-22

Abstract: In a recent and influential empirical paper, Francis, LaFond, Olsson, and Schipper (FLOS) [2005. The market pricing of accruals quality. Journal of Accounting and Economics 39, 295-327] conclude that accruals quality (AQ) is a priced risk factor. We explain that FLOS' regressions examining a contemporaneous relation between excess returns and factor returns do not test the hypothesis that AQ is a priced risk factor. We conduct appropriate asset-pricing tests for determining whether a potential risk factor explains expected returns, and find no evidence that AQ is a priced risk factor.

Keywords: Asset-pricing; tests; Accruals; quality; Information; risk; Portfolio; theory; and; diversification (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (109)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:46:y:2008:i:1:p:2-22

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