The Forecasting Ability of Accounting Risk Measures: Some Additional Evidence.

Abstract ABSTRACT: Previous research Beaver et al., 1970 indicated that a model using accounting data appeared to be able to forecast future levels of the market risk measure β better than a model using past information on market risk alone. Subsequent improvements in models using past market risk data suggest that the superior forecasting ability of accounting data-based models ought to be reinvestigated. This study reexamines the forecasts of market risk produced by models based on accounting data and finds that these models still appear to forecast future levels of market risk marginally better than models based on past market risk information alone.