The competitive environment hypothesis revisited: non-linearity, nonstationarity and profit persistence
Much empirical literature dealing with the competitive environment hypothesis tends to find nonstationary behaviour and very high persistence in time series of company profits. Profit time series is modelled using a simple threshold autoregressive model that allows for nonstationary behaviour over subsamples. Using a new dataset consisting of profits for more than 150 US companies over a time period of 50 years, statistical evidence is presented that the high persistence observed in profits when using linear autoregressive models is often due to the misspecification of the data generating process.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 38 (2006)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-389, June.
- Mehmet Caner & Bruce E. Hansen, 1998.
"Threshold Autoregressions with a Near Unit Root,"
9821, Department of Economics, Bilkent University.
- Dixit, Avinash K, 1989.
"Entry and Exit Decisions under Uncertainty,"
Journal of Political Economy,
University of Chicago Press, vol. 97(3), pages 620-638, June.
- Basci Erdem & Caner Mehmet, 2005.
"Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a New Threshold Unit Root Test,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 9(4), pages 1-21, December.
- Erdem Basci & Mehmet Caner, 2005. "Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a new Threshold Unit Root Test," International Finance 0512001, EconWPA.
- Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003.
"Testing for unit roots in heterogeneous panels,"
Journal of Econometrics,
Elsevier, vol. 115(1), pages 53-74, July.
- Tom Doan, "undated". "IPSHIN: RATS procedure to implement Im, Pesaran and Shin panel unit root test," Statistical Software Components RTS00098, Boston College Department of Economics.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
- Mueller,Dennis C., 2009.
"Profits in the Long Run,"
Cambridge University Press, number 9780521101592, December.
- Glen, Jack & Lee, Kevin & Singh, Ajit, 2001. "Persistence of profitability and competition in emerging markets," Economics Letters, Elsevier, vol. 72(2), pages 247-253, August.
- P. Geroski, 1998.
"An Applied Econometrician's View of Large Company Performance,"
Review of Industrial Organization,
Springer;The Industrial Organization Society, vol. 13(3), pages 271-294, June.
- Geroski, Paul A, 1998. "An Applied Econometrician's View of Large Company Performance," CEPR Discussion Papers 1862, C.E.P.R. Discussion Papers.
- Mehmet Caner & Bruce E. Hansen, 2001.
"Threshold Autoregression with a Unit Root,"
Econometric Society, vol. 69(6), pages 1555-1596, November.
- Chang, Yoosoon, 2002.
"Nonlinear IV Unit Root Tests in Panels with Cross-Sectional Dependency,"
2000-08, Rice University, Department of Economics.
- Chang, Yoosoon, 2002. "Nonlinear IV unit root tests in panels with cross-sectional dependency," Journal of Econometrics, Elsevier, vol. 110(2), pages 261-292, October.
- Yoosoon Chang, 2000. "Nonlinear IV Unit Root Tests in Panels with Cross-Sectional Dependency," CIRJE F-Series CIRJE-F-85, CIRJE, Faculty of Economics, University of Tokyo.
- Taylor, Alan M, 2001.
"Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price,"
Econometric Society, vol. 69(2), pages 473-498, March.
- Alan M. Taylor, 2000. "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price," NBER Working Papers 7577, National Bureau of Economic Research, Inc.
- Goddard, J. A. & Wilson, J. O. S., 1999. "The persistence of profit: a new empirical interpretation," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 663-687, July.
- Mueller, Dennis C, 1977. "The Persistence of Profits above the Norm," Economica, London School of Economics and Political Science, vol. 44(176), pages 369-380, November.
- Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002.
"Unit root tests in panel data: asymptotic and finite-sample properties,"
Journal of Econometrics,
Elsevier, vol. 108(1), pages 1-24, May.
- Tom Doan, "undated". "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:38:y:2006:i:4:p:465-472. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.