The Relationship Between Volatility and Predictability of Profit

Abstract

This article is discussed relationship between volatility and predictability of profit. This is clear that one purposes of accounting and preparing financial statements, provide useful information to facilitate decision-making. With financial reports is done predictability for organization’s performance future. Accounting profit forecasts as a factor in economic decision-making are a favorite of investors, creditors, managers, financial analysts, and researchers. People can use this information in evaluation models, to improve the efficiency of capital markets, to assess their ability to pay, risk assessment, assessment of economic performance and stewardship of management, evaluation of how management accounting methods used in the discussion of income smoothing earnings forecasts for management decisions and use the economic, finance and accounting research. In this study to review and analyze the relationship between volatility and the ability to forecast profits in the short term and long term in an Iranian bank, in the period of 2009 till 2014. In fact, this article seeks to improve profit forecasts by variability of profits. The results show that the volatility of short-term and long-term profitability and predictability are inversely. The relationship between predictability and volatility is weaker than the relationship between predictability and the level of profits in the short-term and long-term. So, the current profit more appropriate tool to judge the predictability of earnings. Long-term and short-term profit trends mean reversion.