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
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
Operating profit, COP, accruals, accruals anomaly
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