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The Accounting Rate of Return and Economic Growth

Author

Listed:
  • Jonathan Ross

    (Western Kentucky University)

  • David Ziebart

    (University of Kentucky)

Abstract

The fundamental theorem of accounting (FTA) (Fellingham and Lin (2020) and Fellingham, Lin and Schroeder (2022)) states that, under some realistic assumptions, the accounting rate of return on assets is equal to information. Ross and Ziebart (2023) show several empirical implications of the fundamental theorem of accounting regarding the meaningfulness of the accounting rate of return to market participants. The implications collectively provide evidence that accounting rates of return are the more meaningful information source to market participants than stock market rates of return. These findings motivate this study which uses quarterly data and finds that current aggregate U.S. accounting rates of return can explain current and predict future GDP growth rates of the U.S. economy.

Suggested Citation

  • Jonathan Ross & David Ziebart, 2024. "The Accounting Rate of Return and Economic Growth," Journal of Economic Insight, Missouri Valley Economic Association, vol. 50(1), pages 87-111.
    • Handle: RePEc:mve:journl:v:50:y:2024:i:1:p:87-111
    as

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    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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