Reexamination of Whether Accrual Quality Is a Price Factor

May Xiaoyan Bao, Xiaoyan Cheng, John Geppert and David B. Smith

Accounting and Finance Research, 2019, vol. 8, issue 3, 103

Abstract: In this study we investigate whether accrual quality is a factor in capital asset pricing. Our analysis consists of two parts. First, we use a panel data regression that controls for cross-section fixed effects to implement the second stage of the Fama-MacBeth regression (Petersen 2009). In the second part, we use the Campbell (1991) return decomposition and vector autoregressive model (VAR) to decompose the two-stage cross-sectional regressions. This allows us to investigate whether accrual quality is a priced factor in terms of the three components of the return, which include one-period expected return, cash flow news and discount-rate news.Â

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:afr111:v:8:y:2019:i:3:p:103

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