Core, John EGuay, Wayne RVerdi, Rodrigo S2023-05-222023-05-222008-09-012016-05-25https://repository.upenn.edu/handle/20.500.14332/1038In a recent and influential empirical paper, Francis, LaFond, Olsson, and Schipper (FLOS) [2005. The market pricing of accruals quality. Journal of Accounting and Economics 39, 295–327] conclude that accruals quality (AQ) is a priced risk factor. We explain that FLOS’ regressions examining a contemporaneous relation between excess returns and factor returns do not test the hypothesis that AQ is a priced risk factor. We conduct appropriate asset-pricing tests for determining whether a potential risk factor explains expected returns, and find no evidence that AQ is a priced risk factor.© 2008. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/asset-pricing testsaccruals qualityinformation riskportfolio theory and diversificationAccountingArticle