The Compare of Excess Returns of Portfolio Based on Traditional Accruals and Percent Accruals

Investors using many Strategies in select portfolio. One of this Strategies is accruals. Operating accruals and Total accruals are two measures of Accruals. This measures are calculated in two ways، cash flow method and balance sheet method. So far in cash flow method and balance sheet method، accruals to enter in experimental models scaled by average total assets. In this study propose a small change in the definition of accruals. instead of scaling accruals by average total assets، this scale by earnings (NOI or NI). We label this definition of accruals as “percent accruals”. The percent accruals measure differs most from traditional accruals measure. This seemingly simple change in the definition of accruals produces a radically different sort of the data and yield larger excess returns. This study first investigate excess return in low and high portfolio at one of strategies and then investigate the using traditional and percent accruals in select portfolio. The study sample consisted of 158 companies listed on the Tehran Stock Exchange. The period of study is 2002 to 2011. Researching results show that only at percent total accrual، excess return in low portfolio is better than high portfolio. Results show excess return only in low portfolio of percent total accrual better than low portfolio of traditional total accrual