Product market competition, idiosyncratic and systematic volatility

Hussein Abdoh and Oscar Varela

Journal of Corporate Finance, 2017, vol. 43, issue C, 500-513

Abstract: This study finds that competition increases idiosyncratic volatility relative to systematic volatility. Market power facilitates passing on firm specific cost shocks to customers but is irrelevant to passing on market cost shocks. A firm's competitive advantage in an industry is also more affected by changes in firm specific costs when there are many rivals. The results are robust to significant reductions in import tariff rates that reduce market power and consistent with lower pairwise returns' correlations following such events.

Keywords: Product market competition; Idiosyncratic volatility; Systematic volatility; Pairwise stock-returns' correlations (search for similar items in EconPapers)
JEL-codes: D40 G12 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:43:y:2017:i:c:p:500-513

DOI: 10.1016/j.jcorpfin.2017.02.009

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