The accruals anomaly and the value-glamour effect are deeply related. Using cash-flow-to-price (C/P) — which captures both — the authors show accruals and value-glamour are largely the same phenomenon: low-accrual value stocks (high C/P) and high-accrual glamour stocks lie on a single mispricing continuum, with C/P a parsimonious summary signal.
What anomaly it documents
Predictor: cash-flow-to-price (C/P), unifying accruals and value-glamour.
Shape: C/P subsumes much of accruals and value-glamour as one anomaly.
OSAP predictor: cfp.
How to construct it
Sorting variable: operating cash flow to price (C/P).
Universe: firms with statements.
Portfolio formation: rank into C/P deciles.
Long / short: long high C/P, short low.
Weighting: equal-weighted.
Rebalancing: annual.
Evidence and replication
Period
Notes
Source
IS (1973–1997)
C/P unifies accruals and value-glamour mispricing
this paper
OOS (post-2004)
cash-flow value persists; accrual leg weaker
post-publication
OSAP (cfp)
replicates
Chen & Zimmermann 2022
Why it might work
Earnings fixation: investors over-rely on earnings and underweight cash flows.
Single mispricing: value-glamour and accruals reflect the same extrapolation error.
Limitations and risks
Value overlap: correlated with B/M, E/P.
Accrual decay: the accrual component has weakened.
Fundamentals dependence: needs cash-flow data.
Key references
Desai, H., Rajgopal, S. & Venkatachalam, M. (2004) — Value-Glamour and Accruals Mispricing: One Anomaly or Two? — TAR — DOI: 10.2308/accr.2004.79.2.355
Provenance: generated from the paper's abstract and metadata, not full text; sample periods and replication notes are indicative — verify against the source.
