The paper presents an accounting framework for identifying characteristics that indicate expected returns. A model links expected returns to expected earnings and earnings growth, so a characteristic indicates expected returns if it indicates expected earnings and earnings growth that the market...

The paper presents a framework for identifying accounting numbers that indicate risk and expected return. The framework establishes conditions under which book-to-price (B/P), so prominent in asset pricing, indicates expected returns: B/P indicates expected returns if it forecasts future...

We decompose broad based measures of accruals into firm specific and related firm components. We find that the negative relation between accruals and future firm performance is almost entirely attributable to the firm specific component. Standard risk based explanations are hard to reconcile...