Accruals reflect management judgment and predictions.
As firms experience larger increases in accruals, investors become more diverse in their opinions of firm value.
Due to short-sale constraints, stock price reflects the beliefs of the optimistic investors.
Firms with larger increases in accruals will be overpriced in the short run and experience lower stock returns in the long run.
Divergence of investor beliefs provides additional explanatory power for accruals anomaly beyond investor fixation.