The Accrual Anomaly: Risk or Mispricing?

David Hirshleifer, Kewei Hou and Siew Hong Teoh

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: We document considerable return comovement associated with accruals after controlling for other common factors. An accrual-based factor-mimicking portfolio has a Sharpe ratio of 0.15, higher than that of the market factor or the HML factor of Fama and French (1993). In time series regressions, a model that includes the Fama-French factors and the additional accrual factor captures the accrual anomaly in average returns. However, further time series and cross-sectional tests indicate that it is the accrual characteristic rather than the accrual factor loading that predicts returns. These findings favor a behavioral explanation for the accrual anomaly.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 2006-03
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: The Accrual Anomaly: Risk or Mispricing? (2012)
Working Paper: The Accrual Anomaly: Risk or Mispricing? (2007)
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