RoyaltyStat Blog

Arm’s Length Profit Margin

Posted by Ednaldo Silva on Apr 20, 2017 3:19:07 PM

We estimated the equilibrium OMAD [operating (profit) margin after depreciation] of certain U.S. retailers using an autoregressive (AR(1)) model built-in RoyaltyStat. RoyaltyStat uses the Gauss run-time engine, so the regression estimates are reliable.

Arm's Length Range - Most Reliable Measure

Posted by Ednaldo Silva on Mar 20, 2016 7:08:06 AM

In statistics, we consider a random variable in terms of a reliable estimate of its central value (center) and spread from the center. The center is measured by the mean, and the spread by the standard deviation from the mean. In practice, data samples (such as the usual judgement selection of comparables in transfer pricing practice) contain outliers that distort the estimates of mean and standard deviation. As a result, statistical (confidence or tolerance) intervals based on the mean and standard deviation may not be reliable. See Gerald Hahn & William Meeker, Statistical Intervals (John Wiley, 1991) for a detailed coverage of tolerance and confidence intervals.