Rolling Window
What does "rolling window" mean in the following sentence?

"To test the third hypothesis, we use an indicator variable (POSDA) that takes the value of one if the sum of a firm’s discretionary accruals (DA) is positive for the four-quarter rolling window ending in quarter t and zero otherwise."

Thanks a lot in advance

Question

Rolling Window
What does "rolling window" mean in the following sentence?

"To test the third hypothesis, we use an indicator variable (POSDA) that takes the value of one if the sum of a firm’s discretionary accruals (DA) is positive for the four-quarter rolling window ending in quarter t and zero otherwise."

Thanks a lot in advance

Answer

A rolling window is the same as a moving average. Take the average of 4 quarters. Then move forward one quarter and get next 4 quarter average.

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