Fairfield, Whisenant & Yohn show Sloan's accrual anomaly is part of a broader growth-in-net-operating-assets effect. Both accruals and the other component of NOA growth (long-term operating-asset growth) are less persistent for future profitability than cash flows, and the market overprices both — recasting accruals mispricing as a special case of growth mispricing.
What anomaly it documents
Predictor: growth in net operating assets (accruals + long-term NOA growth).
Direction: negative — high NOA growth → lower future returns and profitability.
Shape: monotone; subsumes accruals as one component of NOA growth.
OSAP predictor: GrLTNOA.
How to construct it
Sorting variable: growth in long-term net operating assets (and total NOA growth).
Universe: firms with statements.
Portfolio formation: rank into NOA-growth deciles.
Long / short: long low NOA growth, short high.
Weighting: equal-weighted.
Rebalancing: annual.
Evidence and replication
Period
Notes
Source
IS (1964–1993)
NOA growth mispriced; subsumes accruals
this paper
OOS (post-2003)
leads to Hirshleifer et al. NOA scaled by assets
post-publication
OSAP (GrLTNOA)
replicates
Chen & Zimmermann 2022
Why it might work
Diminishing returns to growth: rapid operating-asset growth has low persistence the market overweights.
Investment overlap: correlated with asset-growth/investment anomalies.
Key references
Fairfield, P., Whisenant, S. & Yohn, T. (2003) — Accrued Earnings and Growth — TAR — DOI: 10.2308/accr.2003.78.1.353
Sloan, R. (1996) — Do Stock Prices Fully Reflect Information in Accruals and Cash Flows? — TAR
Provenance: generated from the paper's abstract and metadata, not full text; sample periods and replication notes are indicative — verify against the source.
