92 – 92 - Time Series and Finance
Estimating Inequality Process Parameters from Corporate Market Capitalizations
John Angle
The Inequality Process Institute LLC
The Inequality Process (IP), a particle system, accounts for five frequently seen stock market statistical patterns, evidence that motivates an IP model of corporate market capitalizations. Solutions of the IP are determined by its particle parameters. The IP’s application to workers’ labor income conditioned on their educations takes their educations as a self-evident indicator of IP particle parameters. The verbal theory from which the IP was abstracted posits that more productive workers are more sheltered from competition for wealth. There is no single self-evident indicator of corporate wealth productivity as education is for workers. Instead, there are many. Deciding which or which combination requires relating indicators of corporate wealth productivity to an initial estimate of IP particle parameters. The present paper describes how to do that initial estimate. This paper estimates an IP particle parameter for each of 921 large U.S. corporations by fitting that particle’s wealth to that corporation’s market capitalization. The data are from the 2013 Fortune Magazine 1000 list of large U.S. corporations.