This article proposes a simple approach to analyzing profit dynamics, which allows for time-varying persistence of profits. The time series model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive process. Using the longest time series available on profits for more than a hundred U.S. firms, we find that there is ample evidence of time variation in the persistence parameter.

(JEL L00, C22)

ABBREVIATION

DF: Dickey-Fuller

(ProQuest: ... denotes formulae omitted.)

I. INTRODUCTION

Since the seminal contributions of Mueller (1977, 1986), there is a fruitful and steadily growing literature aimed at investigating empirically the persistence ...

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