Accruals, capital investments, and stock returns

K. C.John Wei, Feixue Xie

Research output: Journal article publicationJournal articleAcademic researchpeer-review

16 Citations (Scopus)


The evidence from this study slum's that the "accruals anomaly" and the "capital investment anomaly" are distinct, even though capital investments and accruals may be related in a certain way. The results also indicate that, after adjustment for the Fama-French three risk factors, iiwestors earn substantially higher returns by using a strategy that exploits both anomalies at the same time than by exploiting either anomaly alone. Using current accruals as the measure of accruals produced similar results to using total accruals, and the results are robust to various measures of return. The evidence suggests that managers in companies ranked highest in both accruals and capital investments may be overly optimistic about future demand for their products.

Original languageEnglish
Pages (from-to)34-44
Number of pages11
JournalFinancial Analysts Journal
Issue number5
Publication statusPublished - 1 Sept 2008
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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