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 0.16, higher than that of the market factor or the SMB and HML factors of Fama and French. According to rational...

This paper examines whether the firm-level accrual and cash flow effects extend to the aggregate stock market. In sharp contrast to previous firm-level findings, aggregate accruals is a strong positive time series predictor of aggregate stock returns, and cash flows is a negative predictor. In...

Past research has shown that the level of operating accruals is a negative cross-sectional predictor of future stock returns. This paper examines whether the accruals anomaly extends to the aggregate stock market. In contrast with cross-sectional findings, there is no indication that aggregate...