Is Sales Growth Of Companies Listed On The Warsaw Stock Exchange Mean-Reverting?

Abstract

Empirical research shows that corporate financial results (measured by sales growth, profitability, earnings growth, leverage, etc.) are characterized by the long-term reversion toward the levels average for the whole economy. In the case of sales growth this means that companies which in a given year show above-average growth in the following periods express the tendency to show slower pace of this growth and companies which in a given year show below-average growth in the following periods express the tendency to show faster pace of growth. In the paper we explore the reversion toward the mean of the sales growth of companies listed on the Warsaw Stock Exchange in the period of 2001-2009. The research confirmed the strong tendency of sales growth to revert toward the mean.

Revisiting mean reversion in profitability and earnings: evidence from India (2007–2020)

“…Profitability and earnings are the elements of interest for this study. Mean reversion in earnings, indicates that firms that have above-average profitability in one year are likely to have lower profitability in subsequent years, and firms that have below-average profitability in one year tend to have higher profitability in subsequent years due to various reasons (Welc, 2011). Business imitation, according to Lieberman and Asaba (2006), can occur when organisations are imitated in order to lessen competition and also because they possess superior information.…”

“…Although there are many studies regarding this subject, for instance – the study by Fama and French (2000) focused on forecasting profitability and earnings in the context of the United States (US) enterprises and the study by Welc (2011) focused on analysing mean reversion in Polish Public companies from 2000 to 2009, the main contribution of the present study is to forecast the profitability and earnings of Indian firms [1]. The initial purpose of this study was to see if there was any mean reversion among Indian-listed companies in India.…”