Accrual mispricing, value-at-risk, and expected stock returns

摘要

We investigate the extent to which a parsimonious measure of maximum likely loss that captures the tail risk of returns-known as value-at-risk (VaR)-explains the relationship between accruals and the cross-sectional dispersion of expected stock returns. We construct portfolios based on Sloan's (Account Rev 71(3):289-315, 1996) total accruals (TA) measure and individual asset-level VaR, which reflects the dynamic behavior of the asset distribution. We document that VaR is in congruence with portfolio-level accruals and that there is a significant positive relationship between VaR and the cross-section of portfolio returns. Allowing a double-sort involving VaR and TA further suggests that the spread between low- and high-TA portfolios is significantly attenuated after controlling for VaR. We also conduct a firm-level cross-sectional regression analysis and demonstrate that the TA- and VaR-based characteristics-but not the factor-mimicking portfolios-are compensated with higher expected returns, and that VaR neither subsumes nor is subsumed by TA. Finally, our cross-sectional decomposition analysis suggests that the firm-level VaR captures at least 7% of the accrual premium even in the presence of size and book-to-market. These findings lend support for the mispricing explanation of the accrual anomaly.