Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7415763 | Journal of Accounting Literature | 2016 | 65 Pages |
Abstract
Economic theory suggests that profits of firms in industries with higher competition are less persistent and more volatile than in industries with lower competition (Stigler, 1963; Mueller, 1977). Extending this reasoning, I hypothesize that accounting-based fundamentals are more effective in predicting performance in industries with lower competition. I find that a measure of fundamentals (Piotroski's F-score) has greater ability to identify potentially mispriced securities in industries with lower competition. The results are robust to using a variety of competition measures and imply that industry competition is an important consideration in the application of fundamental analysis.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Accounting
Authors
Irfan Safdar,