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Tracing The Dynamics Of Competition: Evidence From Company Profits

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  • JES�S CRESPO CUARESMA
  • ADELINA GSCHWANDTNER

Abstract

"This article proposes a simple approach to analyzing profit dynamics, which allows for time-varying persistence of profits. The time series model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive process. Using the longest time series available on profits for more than a hundred U.S. firms, we find that there is ample evidence of time variation in the persistence parameter." ("JEL" L00, C22) Copyright (c) 2007 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 46 (2008)
Issue (Month): 2 (04)
Pages: 208-213

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Handle: RePEc:bla:ecinqu:v:46:y:2008:i:2:p:208-213

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References

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  1. Goddard, J. A. & Wilson, J. O. S., 1999. "The persistence of profit: a new empirical interpretation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 17(5), pages 663-687, July.
  2. Jesús Crespo-Cuaresma & Adelina Gschwandtner, 2003. "The competitive environment hypothesis revisited: Nonlinearity, nonstationrity and profit persistence," Vienna Economics Papers, University of Vienna, Department of Economics 0316, University of Vienna, Department of Economics.
  3. Glen, Jack & Lee, Kevin & Singh, Ajit, 2001. "Persistence of profitability and competition in emerging markets," Economics Letters, Elsevier, Elsevier, vol. 72(2), pages 247-253, August.
  4. Adelina Gschwandtner, 2004. "Evolution of Profit Persistence in the US: Evidence from four 20-years periods," Vienna Economics Papers, University of Vienna, Department of Economics 0410, University of Vienna, Department of Economics.
  5. Odagiri, Hiroyuki & Yamawaki, Hideki, 1986. "A study of company profit-rate time series : Japan and the United States," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 4(1), pages 1-23, March.
  6. B. Burcin Yurtoglu, 2004. "Persistence of firm-level profitability in Turkey," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(6), pages 615-625.
  7. Adelina Gschwandtner, 2005. "Profit persistence in the 'very' long run: evidence from survivors and exiters," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(7), pages 793-806.
  8. Mueller, Dennis C, 1977. "The Persistence of Profits above the Norm," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 44(176), pages 369-80, November.
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Cited by:
  1. Giorgio Canarella & Stephen M. Miller & Mahmoud M. Nourayi, 2012. "Firm Profitability: Mean-Reverting or Random-Walk Behavior?," Working papers, University of Connecticut, Department of Economics 2012-05, University of Connecticut, Department of Economics, revised Oct 2012.
  2. Andrea Vaona, 2010. "On the gravitation and convergence of industry profit rates in Denmark, Finland, Italy and the US," Working Papers, University of Verona, Department of Economics 02/2010, University of Verona, Department of Economics.
  3. Adelina Gschwandtner & Jesus Crespo Cuaresma, 2013. "Explaining the Persistence of Profits: A Time-Varying Approach," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(1), pages 39-55, February.
  4. Muravyev, Alexander & Talavera, Oleksandr & Weir, Charlie, 2014. "Performance Effects of Appointing Other Firms' Executive Directors to Corporate Boards: An Analysis of UK Firms," IZA Discussion Papers 7962, Institute for the Study of Labor (IZA).

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