RATES OF PROFIT AS RANDOM VARIABLES
TITLE:
RATES OF PROFIT AS RANDOM VARIABLES
DATE:
Friday, Sep 21st, 2012
TIME:
3:30 PM
LOCATION:
GMCS 214
SPEAKER:
Richard Greenblatt
ABSTRACT:
The realization of profit is the dominant feature of market-based economic systems, determining their dynamics to a large extent. Variation in the rate of profit across firms is the key driving force for capital flow. However, rather than attaining an equilibrium rate of profit, this rate varies widely across firms, and the variation persists over time. However, differing definitions of profit yield estimates that differ widely across firms.
To study the statistical properties of profit rates, I used data from a publicly available database for the U.S. Economy for 2009-2010 (Risk Management Association). For each profit measure, the sample space consists of 771 points. Each point represents aggregate data from a small number of U.S. manufacturing firms of similar size and type (NAICS code of principal product).
When comparing the empirical distribution of rates of profit with respect to e.g., normal or gamma distributions, a significant .heavy tail. was observed, corresponding principally to a number of firms with larger rates of profit than would be expected from a best-fit estimate of the standard distributions to the data. In the case of gross profit rate, a two-factor non-linear stochastic markup pricing model was used successfully to model the data. I also observed that various profit rate measures (gross, operating, and net) show little correlation. In the case of operating and net profit rates, a number of firms show negative profits (losses), ruling out simple gamma or lognormal distributions as complete models for these data.
HOST:
Dr. Jose Castillo.
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