Abstract
Prior research documents mean reversion in firm profitability and growth under the implicit assumption that profitability and growth of all firms revert to a common benchmark at the same rate. However, a large body of academic research suggests that there are systematic interindustry differences (e.g., industry barriers to entry) that differentially affect firm performance based on industry membership. We evaluate the relative forecast accuracy of mean reverting models at the industry and economywide levels and find that industry-specific models are generally more accurate in predicting firm growth but not profitability. Copyright;
| Original language | English (US) |
|---|---|
| Pages (from-to) | 147-178 |
| Number of pages | 32 |
| Journal | Journal of Accounting Research |
| Volume | 47 |
| Issue number | 1 |
| DOIs | |
| State | Published - Mar 1 2009 |
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ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
Cite this
Do industry-level analyses improve forecasts of financial performance. / Fairfield, Patricia M.; Ramnath, Sundaresh; Yohn, Teri Lombardi.
In: Journal of Accounting Research, Vol. 47, No. 1, 01.03.2009, p. 147-178.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Do industry-level analyses improve forecasts of financial performance
AU - Fairfield, Patricia M.
AU - Ramnath, Sundaresh
AU - Yohn, Teri Lombardi
PY - 2009/3/1
Y1 - 2009/3/1
N2 - Prior research documents mean reversion in firm profitability and growth under the implicit assumption that profitability and growth of all firms revert to a common benchmark at the same rate. However, a large body of academic research suggests that there are systematic interindustry differences (e.g., industry barriers to entry) that differentially affect firm performance based on industry membership. We evaluate the relative forecast accuracy of mean reverting models at the industry and economywide levels and find that industry-specific models are generally more accurate in predicting firm growth but not profitability. Copyright;
AB - Prior research documents mean reversion in firm profitability and growth under the implicit assumption that profitability and growth of all firms revert to a common benchmark at the same rate. However, a large body of academic research suggests that there are systematic interindustry differences (e.g., industry barriers to entry) that differentially affect firm performance based on industry membership. We evaluate the relative forecast accuracy of mean reverting models at the industry and economywide levels and find that industry-specific models are generally more accurate in predicting firm growth but not profitability. Copyright;
UR - http://www.scopus.com/inward/record.url?scp=58649085038&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=58649085038&partnerID=8YFLogxK
U2 - 10.1111/j.1475-679X.2008.00313.x
DO - 10.1111/j.1475-679X.2008.00313.x
M3 - Article
AN - SCOPUS:58649085038
VL - 47
SP - 147
EP - 178
JO - Journal of Accounting Research
JF - Journal of Accounting Research
SN - 0021-8456
IS - 1
ER -