Autoregression with Exogenous Variable (ARX) is a time-series regression model that extends OLS by including a lagged value of the dependent variable as an additional regressor. This captures persistence in the dependent variable over time – the tendency of firms’…
Ordinary Least Squares (OLS) assumes the variance of the error term is constant across all observations. In practice, financial data rarely behaves this way. Larger firms, higher-revenue years, or certain industries tend to produce more dispersed residuals than others. When this heteroskedasticity…
Ednaldo Silva’s blog dated August 21, 2025, contains three sequential equations about the profit rate. My purpose is to demonstrate the connection between his logarithmic 2nd equation and the 3rd equation, referencing the ECM and ARDL econometric models. I used the same econometric reference he cited and adopted some notations of the textbook by Dimitrios Asteriou and Stephen Hall.
There are often legitimate concerns with using book value versus market value of assets in applying a Return on Assets approach in transfer pricing. While employing a Return on Costs approach may be a reliable alternative, it must also account for comparability differences in asset intensity.