Accruals, Cash Flow, and Operating Profitability in the Cross Section of Stock Returns; Evidence from Tehran Stock Exchange (TSE)
Author(s):
Article Type:
Research/Original Article (دارای رتبه معتبر)
Abstract:
Accruals are the non-cash component of earnings. Cash-based operating profitability is a measure that excludes accruals from the operating profitability. We used this measure to predict stock returns. With a sample of 164 stocks from the Tehran Stock Exchange (TSE) over the period of 2006 to 2015. We observed the relations between accruals, operatingprofitability and cash-based operating profitability in the cross section of stock returns and found that cash-based operating profitability is a better measure compared to accruals and operating profitability in predicting stock returns. We also performed portfolio sorts and priced accrual-size portfolios using Fama and French three-factor model augmented with accruals, operating profitability and cash-based operating profitability. It turned out that the three factor model which was augmented with cash-based operating profitability factor outperformed other augmented models for pricing portfolios sorted by accruals-size according to well-known performance measurement tests such as GRS.
Keywords:
Language:
Persian
Published:
The Iranian Accounting and Auditing Review, Volume:24 Issue: 90, 2018
Pages:
463 to 482
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