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Growth of aggregate corporate earnings and cash-flows: Persistence and determinants

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  • Kryzanowski, Lawrence
  • Mohsni, Sana
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    Abstract

    Consistent with economic intuition and the intuition behind momentum strategies for market timing and sector rotation based on accrual earnings (AE), we find persistence in AE growth rates at the market and industry levels in the short run, and neither persistence nor mean reversion at both levels in the long run. Forecasted industrial production, GDP growth, term premium and default premium exhibit predictive power for short- but not long-term AE growth rates at the market level, and capital intensity and product type exhibit predictive power for both short- and long-term AE growth rates at the industry level. In contrast for growth rates of cash flows (CF), we find mean reversion and neither mean reversion nor persistence in the short- and long-run, respectively, at the market and industry levels.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Economics & Finance.

    Volume (Year): 25 (2013)
    Issue (Month): C ()
    Pages: 13-23

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    Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:13-23

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    Web page: http://www.elsevier.com/locate/inca/620165

    Related research

    Keywords: Persistence; Mean-reversion; Growth rates; Earnings; Cash flows;

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    Cited by:
    1. Faff, Robert & Gharghori, Philip & Nguyen, Annette, 2014. "Non-nested tests of a GDP-augmented Fama–French model versus a conditional Fama–French model in the Australian stock market," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 627-638.

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