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.