The differences between the economic rate of return measure and the accounting rate of return measure are explored. The economic rate is based on expectation where the accounting rate is based on actual events. The accounting system filters return data by averaging and other processes to create a slow rate of reversion.
models, forecasting, accounting rates of return, theory, expected earnings
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van Breda, Michael F., "Modeling earnings behavior" (1981). Historical Working Papers. 14.