Accruals Anomaly
TRADE-OFFEarnings driven by accruals persist less than earnings backed by cash, but prices act as if investors weight both the same, so high-accrual firms later disappoint.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 8.9% | 8.9% |
| Return per unit of risk (Sharpe) | 0.55 | 0.65 |
| Worst fall (max drawdown) | -50.1% | -52.6% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): 11.1% a year against 12.4% for the benchmark; Sharpe 0.51 in the training years, 0.61 after.
After 25 bps of trading costs: 7.9% a year. WITHIN RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 8.8% | 19.1% |
| 2000s | 5.0% | -2.6% |
| 2010s | 9.3% | 11.6% |
| 2020s | 14.8% | 14.1% |
// THE IDEA, AS PUBLISHED
Sloan (1996), The Accounting Review · 1996
- Accruals = change in non-cash current assets - change in current liabilities (ex short-term debt and taxes payable) - depreciation, over average assets
- Rank annually into deciles, four months after fiscal year end
- Long lowest-accrual decile, short highest
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 20:48 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE NOT IN THIS UNIVERSE YET (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE.