The Level and Persistence of Growth Rates

Louis K.C. Chan, Jason Karceski, Josef Lakonishok

Research output: Contribution to journalReview articlepeer-review


Expectations about long-term earnings growth are crucial to valuation models and cost of capital estimates. We analyze historical long-term growth rates across a broad cross section of stocks using several indicators of operating performance. We test for persistence and predictability in growth. While some firms have grown at high rates historically, they are relatively rare instances. There is no persistence in long-term earnings growth beyond chance, and there is low predictability even with a wide variety of predictor variables. Specifically, IBES growth forecasts are overly optimistic and add little predictive power. Valuation ratios also have limited ability to predict future growth.

Original languageEnglish (US)
Pages (from-to)643-684
Number of pages42
JournalJournal of Finance
Issue number2
StatePublished - Apr 2003

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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