Asymmetric mean reversion in corporate profits

Bradley T. Ewing; Mark A. Thompson

doi:10.1080/13504850600706271

Asymmetric mean reversion in corporate profits

Bradley T. Ewing, Mark A. Thompson

Business Administration

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4 Scopus citations

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 language	English
Pages (from-to)	935-938
Number of pages	4
Journal	Applied Economics Letters
Volume	14
Issue number	13
DOIs	https://doi.org/10.1080/13504850600706271
State	Published - Oct 2007

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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.",

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AB - 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.

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Asymmetric mean reversion in corporate profits

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