Economics at your fingertips  

Industry Concentration and the Cross-Section of Stock Returns: Evidence from the UK

Nawar Hashem () and Larry Su

Journal of Business Economics and Management, 2015, vol. 16, issue 4, 769-785

Abstract: In this paper, we examine the relationship between market structure and ex- pected stock returns in the London Stock Exchange during 1985 and 2010. Using Fama- MacBeth regressions, we find that industry concentration is negatively related to average stock returns, even after controlling for beta, size, book-to-market equity, momentum, and leverage. In addition, there is a strong evidence of a growth effect. Firms or industry portfolios with smaller book-to-market ratios have significantly higher returns. In contrast, beta is never statistically significant. The above results are robust to firm- and industry- level regressions, and the formation of firms into 100 size-beta portfolios. Our findings indicate that competitive industries earn, on average, higher risk-adjusted returns than concentrated industries. An explanation is that investors in more competitive industries require larger premiums for greater distress risks associated with these industries. Our paper is one of the first to link market competition with the average stock returns in the UK, and contributes to the asset pricing literature by extending the evidence from the US to another important financial market.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Industry Concentration and the Cross-section of Stock Returns: Evidence from the UK (2010) Downloads
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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Journal of Business Economics and Management is currently edited by Izolda Joksiene, Romualdas Ginevicius and Ieva Meidute

More articles in Journal of Business Economics and Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

Page updated 2019-07-22
Handle: RePEc:taf:jbemgt:v:16:y:2015:i:4:p:769-785