Accruals, cash flows, and operating profitability in the cross section of stock returns

• 成果类型: Article
• 署名作者: Ball, Ray; Gerakos, Joseph; Linnainmaa, Juhani T.; Nikolaev, Valeri
• 署名单位: University of Chicago; University of Southern California; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.03.002
• 发表日期: 2016
• 页码: 28-45
• 关键词: Operating profitability; accruals; Cash flows; anomalies; asset pricing

摘要

Accruals are the non-cash component of earnings. They represent adjustments made to cash flows to generate a profit measure largely unaffected by the timing of receipts and payments of cash. Prior research uncovers two anomalies: expected returns increase in profitability and decrease in accruals. We show that cash-based operating profitability (a measure that excludes accruals) outperforms measures of profitability that include accruals. Further, cash-based operating profitability subsumes accruals in predicting the cross section of average returns. An investor can increase a strategy's Sharpe ratio more by adding just a cash-based operating profitability factor to the investment opportunity set than by adding both an accruals factor and a profitability factor that includes accruals. (c) 2016 Elsevier B.V. All rights reserved.