Critical review of models of earnings mean reversion

Autor: Buus, Tomáš, Vlčková, Miroslava
Rok vydání: 2022
Předmět:
Zdroj: Ekonomski pregled
Volume 73
Issue 1
ISSN: 1848-9494
0424-7558
DOI: 10.32910/ep.73.1.6
Popis: The hypothesis that earnings are mean reverting was suggested 90 years ago and has been extensively tested since then. Expectations of earnings’ mean reversion (hereinafter “EMR”) significantly influence pricing of shares or earnings forecasts. Despite proposals and testing of numerous models of EMR, there has been very little inquiry into the meaning of those models in corporate and valuation terms in the academic literature. Therefore, we see such an inquiry as highly desirable. The aim of this paper is to critically review the models of transitory earnings (vice versa EMR), their methodology, practical applicability of their results, and their limitations stemming from the characteristics of earnings data. We find that most of the recent models of transitory earnings (EMR) are misspecified in terms of target earnings or reasons of EMR. We also find that EMR is partly caused by cycles in relevant industry or economy, and partly by company-specific processes and accruals. Also, elimination of survivorship bias and use of margins or lower-level profitability like ROI and ROC instead of ROE is worth testing in EMR models.
Hipoteza da se zarada vraća na svoju srednja vrijednost predložena je prije 90 godina i od tada je opsežno testirana. Očekivanja povrata zarade srednjoj vrijednosti (u daljnjem tekstu “EMR”) značajno utječu na cijene dionica ili prognoze zarade. Unatoč prijedlozima i testiranju brojnih modela EMR-a, bilo je vrlo malo istraživanja o značenju tih modela u korporativnom i vrijednosnom smislu u akademskoj literaturi. Stoga takvo istraživanje smatramo vrlo poželjnim. Cilj ovog rada je kritički osvrnuti se na modele privremenih zarada (obrnuto EMR), njihovu metodologiju, praktičnu primjenjivost njihovih rezultata i njihova ograničenja koja proizlaze iz karakteristika podataka o zaradi. Ustanovljeno je da je većina nedavnih modela privremene zarade (EMR) pogrešno specificirana u smislu ciljane zarade ili razloga EMR-a. Također, potvrđujemo da je EMR dijelom uzrokovan ciklusima u relevantnoj industriji ili gospodarstvu, a dijelom zbog specifičnih procesa u poduzećima i obračuna. Također, eliminiranje pristranosti preživljavanja i korištenje marži ili profitabilnosti na nižoj razini, kao što su ROI i ROC umjesto ROE, vrijedno je testiranja u modelima EMR.
Databáze: OpenAIRE
Externí odkaz: