Asymmetric mean reversion in corporate profits

Bradley T. Ewing, Mark Andrew Thompson

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This article applies the Enders and Granger (1998) unit root test against the stationary alternative with asymmetric adjustment to after-tax corporate profits. Both the standard Dickey-Fuller (1981) model and the momentum threshold autoregressive (MTAR) model reject the null hypothesis of a unit root; however, asymmetric mean reversion is found with the MTAR model. The findings are consistent with economic theories of entry and exit and traditional competitive macroeconomic models.

Original languageEnglish (US)
Pages (from-to)935-938
Number of pages4
JournalApplied Economics Letters
Volume14
Issue number13
DOIs
StatePublished - Oct 1 2007

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Mean reversion
Threshold autoregressive model
Profit
Momentum
Unit root tests
Economic theory
Unit root
Corporate tax
Entry and exit
Asymmetric adjustment
Macroeconomic models

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Asymmetric mean reversion in corporate profits. / Ewing, Bradley T.; Thompson, Mark Andrew.

In: Applied Economics Letters, Vol. 14, No. 13, 01.10.2007, p. 935-938.

Research output: Contribution to journalArticle

Ewing, Bradley T. ; Thompson, Mark Andrew. / Asymmetric mean reversion in corporate profits. In: Applied Economics Letters. 2007 ; Vol. 14, No. 13. pp. 935-938.
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