Explanatory & Predictive Power of Momentum Accounting - the AEX An Empirical Study of the Amsterdam Stock Exchange Component Companies (Het Verklarend En Voorspellend Vermogen Van Momentum Accounting)

Abstract

The research question we want to answer in this paper is: have the financial variables of the triple-entry framework of momentum accounting explanatory and predictive power? A detailed example is presented of Royal Philips Electronics N.V. Although in this study we cannot generalize the result of this example on a statistical basis to a population we try to replicate it with other firms. To this purpose we use data of 17 of the 24 firms that that are listed on the AEX; the Amsterdam stock ex-change. We presuppose that when we find more confirmatory examples our confidence may grow in the underlying (accounting) theory. The empirical data used are quarterly financial statements data of van Royal Philips Electronics N.V. and the annual financial statements data of 17 out of the 24 AEX listed firms. Our analysis shows that it is possible to explain ex post the trend of net wealth of Philips as well as for 17 of the AEX listed firms and in more than halve of those cases the trend can be forecasted ahead one to three years.

Note: Downloadable document is in Dutch.

Keywords: momentum accounting, force accounting, accounting dimensions, arima

JEL Classification: C43, C53, C63, M21, M40, M41