Patterns of sustained performance: beginnings, paths and ends

SummaryUsing the last decade of Center for Research on Security Prices data and the Capital Asset Pricing Model model to compare firms, we assess the origins, paths and destinations of extreme firm performance. We find that firms that will experience a run of persistent superior (inferior) performance are likely to start at a position of inferior (superior) performance, and that the runs of sustained performance are fairly linear. We also find that failed firms follow a path that reveals a resilience to decline rather than an accelerating acceptance of it, whereas extremely successful firms usually accelerated to their apexes. Overall, the results show that there are several distinct and important types of extreme performance that each require further study.