Are Book-Tax Differences Mispriced? Academic Article uri icon


  • ABSTRACT I examine whether book-tax differences (BTDs) are mispriced. I predict that BTD mispricing is the operating cash flows-to-price (CFO/P) anomaly in disguise. Using both time-series asset pricing tests and cross-sectional returns tests, I provide consistent evidence that returns to trading on BTDs are explained by CFO/P. Rather than being an independent anomaly, the findings indicate that any evidence of BTD mispricing is subsumed by the broader CFO/P anomaly. These findings stand in contrast to many studies that infer BTDs possess unique information for future earnings reflected in stock prices with a delay. JEL Classifications: G12; G14; M41

published proceedings

  • The Accounting Review

author list (cited authors)

  • Hepfer, B. F.

citation count

  • 0

complete list of authors

  • Hepfer, Bradford F

publication date

  • May 2023