On the predictability of firm performance via simple time-series and econometric models: evidence from UK SMEs

Abstract

This article examines the predictive accuracy of simple time-series and econometric models on forecasting firm performance in terms of sales turnover. Evidence from Small and Medium sized Enterprises (SMEs) in the United Kingdom are presented. The study identifies operational rules under which the class of simple econometric regression models is more accurate than simple time-series forecasting alternatives, thus more appropriate to back-up multiple investment decisions.