A critical assessment of the time-series literature in accounting pertaining to quarterly accounting numbers

Research output: Contribution to journalArticle

Abstract

This paper summarizes, critiques, and synthesizes the time-series literature in accounting pertaining to quarterly accounting numbers. It reviews work on quarterly earnings, quarterly balance sheet and income statement subcomponents, and quarterly cash-flows from operations (CFOs). Several salient findings emerge. First, the premier ARIMA models attributed to Foster (1977), Griffin (1977) and Brown and Rozeff (1979) were identified on relatively small samples dominated by "old economy" firms. It appears that the descriptive validity of these ARIMA structures must be called into question when analyzing more current databases replete with high-technology, regulated, and financial-service firms (. Lorek & Willinger, 2007). Second, the use of ARIMA-based analytical review procedures in audit settings is not cost effective. Third, recent evidence (. Lorek & Willinger, 2008, 2011) supports the univariate Brown & Rozeff (100) × (011) ARIMA model as the best statistically-based prediction model for quarterly CFO, a finding of considerable import to analysts, investors, and researchers.

Original languageEnglish (US)
Pages (from-to)315-321
Number of pages7
JournalAdvances in Accounting
Volume30
Issue number2
DOIs
StatePublished - 2014

Fingerprint

Cash flow
ARIMA models
Audit
Import
Small sample
Balance sheet
Prediction model
High technology
Investors
Income
Financial services
Service firms
Data base
Analysts

Keywords

  • ARIMA models
  • Nonseasonal firms
  • Quarterly cash flows
  • Quarterly earnings

ASJC Scopus subject areas

  • Accounting
  • Finance

Cite this

@article{b8608034f2194204a89474854274b15f,
title = "A critical assessment of the time-series literature in accounting pertaining to quarterly accounting numbers",
abstract = "This paper summarizes, critiques, and synthesizes the time-series literature in accounting pertaining to quarterly accounting numbers. It reviews work on quarterly earnings, quarterly balance sheet and income statement subcomponents, and quarterly cash-flows from operations (CFOs). Several salient findings emerge. First, the premier ARIMA models attributed to Foster (1977), Griffin (1977) and Brown and Rozeff (1979) were identified on relatively small samples dominated by {"}old economy{"} firms. It appears that the descriptive validity of these ARIMA structures must be called into question when analyzing more current databases replete with high-technology, regulated, and financial-service firms (. Lorek & Willinger, 2007). Second, the use of ARIMA-based analytical review procedures in audit settings is not cost effective. Third, recent evidence (. Lorek & Willinger, 2008, 2011) supports the univariate Brown & Rozeff (100) × (011) ARIMA model as the best statistically-based prediction model for quarterly CFO, a finding of considerable import to analysts, investors, and researchers.",
keywords = "ARIMA models, Nonseasonal firms, Quarterly cash flows, Quarterly earnings",
author = "Lorek, {Kenneth S}",
year = "2014",
doi = "10.1016/j.adiac.2014.09.008",
language = "English (US)",
volume = "30",
pages = "315--321",
journal = "Advances in Accounting",
issn = "0882-6110",
publisher = "JAI Press",
number = "2",

}

TY - JOUR

T1 - A critical assessment of the time-series literature in accounting pertaining to quarterly accounting numbers

AU - Lorek, Kenneth S

PY - 2014

Y1 - 2014

N2 - This paper summarizes, critiques, and synthesizes the time-series literature in accounting pertaining to quarterly accounting numbers. It reviews work on quarterly earnings, quarterly balance sheet and income statement subcomponents, and quarterly cash-flows from operations (CFOs). Several salient findings emerge. First, the premier ARIMA models attributed to Foster (1977), Griffin (1977) and Brown and Rozeff (1979) were identified on relatively small samples dominated by "old economy" firms. It appears that the descriptive validity of these ARIMA structures must be called into question when analyzing more current databases replete with high-technology, regulated, and financial-service firms (. Lorek & Willinger, 2007). Second, the use of ARIMA-based analytical review procedures in audit settings is not cost effective. Third, recent evidence (. Lorek & Willinger, 2008, 2011) supports the univariate Brown & Rozeff (100) × (011) ARIMA model as the best statistically-based prediction model for quarterly CFO, a finding of considerable import to analysts, investors, and researchers.

AB - This paper summarizes, critiques, and synthesizes the time-series literature in accounting pertaining to quarterly accounting numbers. It reviews work on quarterly earnings, quarterly balance sheet and income statement subcomponents, and quarterly cash-flows from operations (CFOs). Several salient findings emerge. First, the premier ARIMA models attributed to Foster (1977), Griffin (1977) and Brown and Rozeff (1979) were identified on relatively small samples dominated by "old economy" firms. It appears that the descriptive validity of these ARIMA structures must be called into question when analyzing more current databases replete with high-technology, regulated, and financial-service firms (. Lorek & Willinger, 2007). Second, the use of ARIMA-based analytical review procedures in audit settings is not cost effective. Third, recent evidence (. Lorek & Willinger, 2008, 2011) supports the univariate Brown & Rozeff (100) × (011) ARIMA model as the best statistically-based prediction model for quarterly CFO, a finding of considerable import to analysts, investors, and researchers.

KW - ARIMA models

KW - Nonseasonal firms

KW - Quarterly cash flows

KW - Quarterly earnings

UR - http://www.scopus.com/inward/record.url?scp=84922713909&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84922713909&partnerID=8YFLogxK

U2 - 10.1016/j.adiac.2014.09.008

DO - 10.1016/j.adiac.2014.09.008

M3 - Article

AN - SCOPUS:84922713909

VL - 30

SP - 315

EP - 321

JO - Advances in Accounting

JF - Advances in Accounting

SN - 0882-6110

IS - 2

ER -