Some statistical properties of models of transitory earnings
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F60076658%3A12510%2F21%3A43903654" target="_blank" >RIV/60076658:12510/21:43903654 - isvavai.cz</a>
Alternative codes found
RIV/61384399:31110/21:00057786
Result on the web
<a href="https://acta.mendelu.cz/pdfs/acu/2021/02/01.pdf" target="_blank" >https://acta.mendelu.cz/pdfs/acu/2021/02/01.pdf</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.11118/actaun.2021.015" target="_blank" >10.11118/actaun.2021.015</a>
Alternative languages
Result language
angličtina
Original language name
Some statistical properties of models of transitory earnings
Original language description
The fact that most of the financial ratios are mean-reverting, is well known. Due to the importance of earnings forecast accuracy, relevant scientific literature in this area concentrates on transitory earnings. The main models used for description of earnings and/or profitability time series are adaptive expectation, autoregressive and partial adjustment models. However, their construction implies severe drawbacks like assumption of intentional adjustment of earnings, sometimes even towards unknown target or towards company-specific target uninfluenced by market, instead of rather realistic assumption of random push of market forces, as we found earlier. This paper proposes a model of mechanical mean reversion of earnings (and/or other company financial data, including ratios). Simulation-based tests of accuracy in a cyclical environment and robustness to input variables non-normality show that the proposed model is more accurate and less biased in capturing the reversion of earnings to industry averages, compared to the most commonly used partial adjustment models.
Czech name
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Czech description
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Classification
Type
J<sub>SC</sub> - Article in a specialist periodical, which is included in the SCOPUS database
CEP classification
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OECD FORD branch
50206 - Finance
Result continuities
Project
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Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace
Others
Publication year
2021
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis
ISSN
1211-8516
e-ISSN
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Volume of the periodical
69
Issue of the periodical within the volume
2
Country of publishing house
CZ - CZECH REPUBLIC
Number of pages
10
Pages from-to
189-198
UT code for WoS article
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EID of the result in the Scopus database
2-s2.0-85109325146