Are accruals mispriced? Evidence from tests of an Intertemporal Capital Asset Pricing Model

Mozaffar Khan

Research output: Contribution to journalArticlepeer-review

74 Scopus citations

Abstract

This paper proposes a risk-based explanation for the accrual anomaly. Risk is measured using a four-factor model motivated by the Intertemporal Capital Asset Pricing Model. Tests of the model suggest that a considerable portion of the cross-sectional variation in average returns to high and low accrual firms is explained by risk. The four-factor model also performs better than some other widely used models in pricing a number of different hedge portfolios.

Original languageEnglish (US)
Pages (from-to)55-77
Number of pages23
JournalJournal of Accounting and Economics
Volume45
Issue number1
DOIs
StatePublished - Mar 1 2008

Keywords

  • Accruals
  • Anomalies
  • Expected return
  • Market efficiency
  • Mispricing
  • Risk

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