EconPapers    
Economics at your fingertips  
 

Industry Concentration and Average Stock Returns

Kewei Hou and David Robinson ()

Journal of Finance, 2006, vol. 61, issue 4, 1927-1956

Abstract: Firms in more concentrated industries earn lower returns, even after controlling for size, book‐to‐market, momentum, and other return determinants. Explanations based on chance, measurement error, capital structure, and persistent in‐sample cash flow shocks do not explain this finding. Drawing on work in industrial organization, we posit that either barriers to entry in highly concentrated industries insulate firms from undiversifiable distress risk, or firms in highly concentrated industries are less risky because they engage in less innovation, and thereby command lower expected returns. Additional time‐series tests support these risk‐based interpretations.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (115) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2006.00893.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:61:y:2006:i:4:p:1927-1956

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-11-17
Handle: RePEc:bla:jfinan:v:61:y:2006:i:4:p:1927-1956