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The Duration of the Adjustment Process of Financial Ratios

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Author Info
Peles, Yoram C
Schneller, Meir I
Abstract

Are financial ratios an observed quantity that is influenced by firms or capital and product markets? The current body of empirical research concentrates on the time series behavior of such ratios when corporate distress is revealed. In this study the time series properties of joint-concern firms is examined. It is shown that for six financial ratios under examination, the data are consistent with partial adjustment process with finite adjustment durations. These durations are estimated through a methodology that does not require an a priori knowledge of the level toward which ratios are adjusted. Furthermore, the order of the six discerned durations is consistent with common wisdom. Copyright 1989 by MIT Press.

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Publisher Info
Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 71 (1989)
Issue (Month): 3 (August)
Pages: 527-32
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Handle: RePEc:tpr:restat:v:71:y:1989:i:3:p:527-32

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  1. Jose Luis Gallizo & Pilar Gargallo & Manuel Salvador, 2008. "Multivariate partial adjustment of financial ratios: a Bayesian hierarchical approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(1), pages 43-64. [Downloadable!]
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This page was last updated on 2009-12-12.


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