The competitive environment hypothesis revisited: Nonlinearity, nonstationarity and profit persistence

Jesús Crespo-Cuaresma () and Adelina Gschwandtner
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Jesús Crespo-Cuaresma: https://econ.univie.ac.at
Authors registered in the RePEc Author Service: Jesus Crespo Cuaresma

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: Much empirical lierature dealing with the competitive environment hypothesis tends to find nonstationary behaviour and very high persistence in time series of company profits. We model profit time series using a simple time series model that allows for nonstationary behavior over subsamples, but overall mean reversion. Using a new dataset constisting of profits for more than 150 US companies over a time period of 50 years, we present statistical evidence that the high persistence observed in profits when using linear autoregressive models is often due to the misspecification of the data generating process.

JEL-codes: C22 L00 (search for similar items in EconPapers)
Date: 2003-10
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Journal Article: The competitive environment hypothesis revisited: non-linearity, nonstationarity and profit persistence (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:vie:viennp:vie0316

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