Accrual quality, skill, and the cross-section of mutual fund returns

• 成果类型: Article
• 署名作者: Nallareddy, Suresh; Ogneva, Maria
• 署名单位: Duke University; University of Southern California
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-017-9389-z
• 发表日期: 2017
• 页码: 503-542
• 关键词: expected stock returns; information asymmetry; accounting quality; Performance evaluation; voluntary disclosure; realized returns; earnings quality; liquidity risk; cost; equity

摘要

We use returns of actively managed mutual funds to document the link between accrual quality (AQ) and systematic (priced) risk. Despite compelling theoretical arguments, prior research finds no evidence that poor AQ commands a risk premium in the cross-section of realized stock returns. We argue that the previously obtained premium estimates are biased downward because, for a large portion of poor AQ stocks, higher expected returns are offset by the news of deteriorating fundamentals. We suggest that skilled mutual fund managers should be able to either avoid investing in stocks with deteriorating fundamentals or assign them lower portfolio weights. As a consequence, returns on their portfolios should better reflect the expected AQ risk premium. Our empirical evidence is consistent with these predictions.