Accounting Papers

Document Type

Journal Article

Date of this Version

9-2008

Publication Source

Journal of Accounting and Economics

Volume

46

Issue

1

Start Page

2

Last Page

22

DOI

10.1016/j.jacceco.2007.08.001

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.

Copyright/Permission Statement

© 2008. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

asset-pricing tests, accruals quality, information risk, portfolio theory and diversification

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Date Posted: 27 November 2017

This document has been peer reviewed.