


Volume 20 No 22 (2022)
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Examining the Relationship Between Stock Returns with Operating Profit, Accruals, and Cash Operating Profit
Habib Piri, Seyyed DaniyalAghvami, BehrozMehrparvar, BehnoushShayesteh, SamiehJazinizadeh
Abstract
Accruals account for the non-cash part of profit calculated by adjusting cash flows and stand for a measure of
profit not affected by the timing of cash receipts and payments. Previous studies have revealed an anomaly
in accruals as a negative relationship between accruals and expected returns. The study estimated stock
returns based on Cash Operating Profit (COP) and operating profit containing accrual items through
regression based on four and six-factor arbitrage models. The findings indicate contrary to previous studies in
Tehran Stock Exchange, operating profit and its constituent components - COP and accruals - cannot predict
stock returns, and stock returns have a more significant relationship with BETA and the ratio of market value
to book value (LnMTB) based on the 6-factor model
Keywords
Operating profit, COP, accruals, accruals anomaly
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