Asymmetric competition, risk, and return distribution

Philipp Mundt and Ilfan Oh

No 145, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: We propose a parsimonious statistical model of firm competition where structural differences in the strength of competitive pressure and the magnitude of return fluctuations above and below the system-wide benchmark translate into a skewed Subbotin or asymmetric exponential power (AEP) distribution of returns to capital. Empirical evidence from US data illustrates that the AEP distribution compares favorably to popular alternative models such as the symmetric or asymmetric Laplace density in terms of goodness of fit when entry and exit dynamics of markets are taken into account.

Keywords: return on capital; maximum entropy; asymmetric Subbotin distribution (search for similar items in EconPapers)
JEL-codes: C12 C16 D21 E10 L10 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com, nep-ecm, nep-mac and nep-rmg
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:145

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