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Modelling profit series: nonstationarity and long memory

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  • Adelina Gschwandtner
  • Michael Hauser

Abstract

The dynamic structure of profit rates for 156 US manufacturing companies is analysed by means of fractional integration techniques as an alternative to the commonly used ARIMA models with respect to the 'persistence of profits'. Thereby the pseudo-spectral density aproach of Velasco and Robinson together with model selection criteria is applied. The results show-despite the short lengths of the series and tests for the integer degrees of integration (d = 0, 1)-that 35.5% of the series may be well-approximated by long-range dependent processes, and 54% are nonstationary. This is a confirmation of the strong challenge to the competitive environment hypothesis obtained by previous studies.

Suggested Citation

  • Adelina Gschwandtner & Michael Hauser, 2008. "Modelling profit series: nonstationarity and long memory," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1475-1482.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:11:p:1475-1482
    DOI: 10.1080/00036840600794355
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    Cited by:

    1. Sanjay Rajagopal, 2012. "A Study of the Returns Behavior of Small Capitalization REITs," Journal of Economics and Behavioral Studies, AMH International, vol. 4(8), pages 457-466.
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    3. Johan E. Eklund & Emma Lappi, 2019. "Persistence of profits in the EU: how competitive are EU member countries?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 327-351, May.
    4. Andrea Vaona, 2010. "On the gravitation and convergence of industry profit rates in Denmark, Finland, Italy and the US," Working Papers 02/2010, University of Verona, Department of Economics.

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