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On Modelling the Persistence of Profits in the Long Run: An Analysis of 156 US Companies, 1950-1999

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Abstract

Long run persistence in company profits is analyzed for 156 US companies over a fifty-year period using AR1 and structural time series tests. A statistically significant degree of consitstency is found between them in identifying firms persistently above or below the competitive norm. However, the structural time series method detects a higher overall incidence of persistence, with nearly 70% of firms classed as not having converged on Zero, compared with 46% under AR1 estimation. The recently proposed structural approach is seen as a useful additional tool in analysing earnings dynamics, in particular where are complex trends and other dynamic complexities.

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  • Adelina Gschwandtner & John R. Cable, 2004. "On Modelling the Persistence of Profits in the Long Run: An Analysis of 156 US Companies, 1950-1999," Vienna Economics Papers vie0409, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie0409
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    1. Maruyama, Nobuhiro & Odagiri, Hiroyuki, 2002. "Does the 'persistence of profits' persist?: a study of company profits in Japan, 1964-97," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1513-1533, December.
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    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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