The Incredibly Non-mean-reverting Corporate Profits

For all of the talk about the necessary mean reversion in corporate profits, let’s start with auto-correlation of Corporate Profits as a % of GDP:

No such mean-reversion.  Future profits are actually well correlated with past profits, but the relationship slips into statistical insignificance – but not into negative (mean-reverting) territory to much degree of statistical significance.

Let’s take a derivative — year/year — to see if _growth_ of profits will demonstrate mean-reversion:

The same story is told here.

Mean-reversion is, at the very least, not supported by historical precedent.