Persistence in growth versus market expectations

Hall, Jason and Tochterman, Matthew (2008) Persistence in growth versus market expectations. Australian Journal of Management, 33 1: 169-199. doi:10.1177/031289620803300109

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Author Hall, Jason
Tochterman, Matthew
Title Persistence in growth versus market expectations
Journal name Australian Journal of Management   Check publisher's open access policy
ISSN 0312-8962
1327-2020
Publication date 2008-06
Year available 2008
Sub-type Article (original research)
DOI 10.1177/031289620803300109
Volume 33
Issue 1
Start page 169
End page 199
Total pages 31
Editor R. Marks
Place of publication Sydney, NSW, Australia
Publisher Australian Graduate School of Management
Collection year 2009
Language eng
Subject C1
900102 Investment Services (excl. Superannuation)
150205 Investment and Risk Management
Abstract We measure the persistence and predictability of sales and earnings growth for Australian-listed firms from 1989 to 2006. In contrast to results from the United States, there is evidence of persistence in growth. There is close to a two-thirds chance that a firm reporting growth above the industry median in one year repeats this performance in the following year. However, there is little evidence that valuation ratios-measured as revenue, earnings or book value of equity relative to market capitalisation-are particularly useful in predicting future growth. Instead, they reflect recent historical growth, especially in the case of the book-to-market ratio. Firms with low book-to-market ratios have relatively high growth over the previous five years, but their growth over the subsequent five years is almost indistinguishable from firms with high book-to-market ratios. The results are consistent with the hypothesis that value stocks outperform growth stocks because investors overstate firms' ability to consistently make high-growth investments.
Keyword Growth
Earnings
Valuation
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: 2009 Higher Education Research Data Collection
UQ Business School Publications
 
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Citation counts: TR Web of Science Citation Count  Cited 3 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 4 times in Scopus Article | Citations
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Created: Mon, 06 Oct 2008, 16:21:34 EST by Karen Morgan on behalf of UQ Business School