Comparing Alternative Methods to Estimate Corporate and Industry Effects

Thomas H. Brush, Constance R. James and Philip Bromiley

Purdue University Economics Working Papers from Purdue University, Department of Economics

Abstract: Recent studies of the relative size of corporate and industry effects have used ANOVA, Variance Components Analysis and Simultaneous Equations (Roquebert, Philips and Westfall 1996; McGahan and Porter, 1997a; 1997b, Brush, Bromiley and Hendrikx, forthcoming). This paper provides a comprehensive evaluation of the advantages and disadvantages of these techniques for evaluating the relative importance of effects. Using a Monte Carlo approach, we empirically compare these techniques. Based on bias and precision of estimation, the simultaneous equation estimates and particularly standardized beta provide the best estimates of effect size.

Pages: 33 pages
Date: 1998-10
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Persistent link: https://EconPapers.repec.org/RePEc:pur:prukra:1118

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