Non-cash investing: The accruals anomaly in the Norwegian market : An empirical analysis of the relation between non-cash earnings and return for the Norwegian stock market

Abstract

Current investment strategies are highly reliant on cash flows and macro-factors, while noncash earnings are, to some extent, ignored. We examine the relation between non-cash-based accruals and stock market return for the Norwegian market and evaluate the correlation between the two in light of established research on the subject. We find a strong correlation between accruals and future market returns for the Norwegian market. Moreover, we find results that are aligned with both efficient and inefficient market explanations for the accruals anomaly. Furthermore, we review the composition of the Norwegian stock market. Here, we find distinct characteristics such as few companies, skewness in company size and significant reliance on the oil sector. Based on these distinct characteristics, our findings might not be applicable to other markets.