Are net discount ratios stationary? Evidence of mean-reversion and persistence

Patrick Hays, Max Schreiber, James E. Payne, Bradley T. Ewing, Michael J. Piette

Research output: Contribution to journalArticlepeer-review

7 Scopus citations


This article extends the debate initiated by Haslag, Nieswiadomy, and Slottje (1991, 1994) and Gamber and Sorensen (1994) in this journal about whether the net discount ratio can be described as a stationary process. Haslag, Nieswiadomy, and Slottje found discount ratios to be stationary. Gamber and Sorensen concluded that they are nonstationary; however, they identified the source of the nonstationarity as a single shift in the mean of the series Using the Cochrane variance ratio and Campbell-Mankiw decomposition tests, the authors find that the net discount ratio follows a trend stationary process. However, to determine the degree or level of persistence Lo's Modified R/S Analysis (1991) is used. The authors find that the relative importance of any mean shift is a function of the duration of the discount period for expected earnings.

Original languageEnglish
Pages (from-to)439-450
Number of pages12
JournalJournal of Risk and Insurance
Issue number3
StatePublished - Sep 2000


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