Reconciling Estimates of the Speed of Adjustment of Leverage Ratios
نویسندگان
چکیده
A number of prominent papers in the literature have estimated the speed of adjustment (SOA) of firms’ leverage ratios with estimators not designed for applications in which the dependent variable is a ratio. This made them detect mean reversion, which they mistakenly considered as readjustment. We propose a non-parametric way to model leverage ratios under the NULL, and a method of reconciling incongruous estimates. Using the earlier estimators, the best joint estimate for the true SOA is zero or negative. There is evidence for some heterogeneity in SOAs across firms.
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