Francis, LaFond, Olsson, and Schipper (2005) document that accrual quality is inversely related to the cost of equity capital. However, Core, Guay, and Verdi (2007) find no association between accrual quality and future stock returns and conclude that there is no evidence that the stock market prices accrual quality. I hypothesize that Core et al.'s result arises because poor accrual quality firms experience negative cash flow shocks in the future, which results in negative returns that offset the higher expected returns for such firms. Consistent with this prediction, I find a significant negative association between realized returns and accrual quality after controlling for cash flow shocks, either by including proxies for future cash flow shocks in asset pricing regressions or by using an accrual quality measure that is less correlated with future cash flow shocks. This result is robust to properly specified and standard asset pricing tests. Overall, this paper adds to the growing literature suggesting that accrual quality is linked to the cost of capital.