Life Cycle Models and Forecasting Growth and Profitability

• 成果类型: Article
• 署名作者: Vorst, Patrick; Yohn, Teri Lombardi
• 署名单位: Maastricht University; Indiana University System; Indiana University Bloomington
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52091
• 发表日期: 2018
• 页码: 357-381
• 关键词: Cash flows; stock-prices; management; earnings; MARKET; industry; persistence; accruals; CLASSIFICATION; acquisitions

摘要

Mean reversion in profitability and growth is a well-documented phenomenon; however, comparatively less is known about the level of analysis that best captures mean reversion. In this study, we find that analyzing firms by life cycle stage improves the out-of-sample accuracy of profitability and growth forecasts over analyzing firms pooled across the economy and analyzing firms by industry. The improved accuracy is robust to both short-term and long-term forecasts of profitability and growth. We also find that the improvement in accuracy of forecasts from life cycle analyses is greatest for firms in the introduction and decline stages and for firms with greater uncertainty. Finally, we examine market participants' use of life cycle information in forming expectations. We find inefficient use of life cycle information in analyst forecasts, but not in management forecasts. We also find that life cycle forecasts are associated with year-ahead abnormal stock returns.