The accrual anomaly
Subtitle: exploring the optimal investment hypothesis
By: Jin Ginger Wu, Lu Zhang, X. Frank Zhang
Contributors: Zhang, Lu; Zhang, Frank; National Bureau of Economic Research
Series: NBER working paper series -- working paper 13525; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13525.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "Interpreting accruals as working capital investment, we hypothesize that firms rationally adjust their investment to respond to discount rate changes.  Consistent with the optimal investment hypothesis, we document that (i) the predictive power of accruals for future stock returns increases with the covariations of accruals with past and current stock returns, and (ii) adding investment-based factors into standard factor regressions substantially reduces the magnitude of the accrual anomaly.  High accrual firms also have similar corporate governance and entrenchment indexes as low accrual firms.  This evidence suggests that the accrual anomaly is more likely to be driven by optimal investment than by investor overreaction to excessive growth or over-investment"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 11/15/2007.

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