Persistence of Accrual Components and Future Stock Returns

This research is aimed to identify factors misleading investors in determining future profitability, focusing on good accruals and accruals estimation error.This study is an applied and quantitative research. Also, because of using past information, it is considered asex-post facto research. The sample consists of 78 firms listed in Tehran Stock Exchange during the years 2004 to 2013 and the hypotheses is tested using regression coefficient analysis. Findings show that the cash component of profit is more persistent than all accrual components and also accruals related to growth is the most persistent component of accruals. In addition, the findings show that cash flow and accruals related to growth have a positive relationship with future returns, and accruals related to temporary fluctuations and accruals estimation errors have a negative relationship with the mentioned variable.According to the results, accruals related to temporary fluctuations and accruals estimation errors lead to investors misleading, due to their lower persistency