Firm power in product market and stock returns
Firm power in product market and stock returns
We compare the buy-and-hold abnormal returns (BHARs) among the deciles portfolios of firms based on their product market power. We document that the value-weighted portfolios (equally-weighted portfolios) of firms with the strongest product market power generate one-year BHARs ranging from 13.96% (8.85%) to 16.90% (10.63%) higher than the portfolios of the weakest firms. The abnormal returns persist even when we control for industry concentration level (as suggested by Hou and Robinson (2006)), common firm characteristics and alternative industry classifications. The higher returns accrued to the portfolios of firms with the strongest product market power can be attributed to the higher future standardized earnings surprises generated by these firms and their lower idiosyncratic volatility.
Buy-and-hold abnormal returns, Idiosyncratic risk, Product market competition, Standardized earnings surprises
182-193
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
August 2017
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
Jory, Surendranath and Ngo, Thanh
(2017)
Firm power in product market and stock returns.
Quarterly Review of Economics and Finance, 65, .
(doi:10.1016/j.qref.2016.09.008).
Abstract
We compare the buy-and-hold abnormal returns (BHARs) among the deciles portfolios of firms based on their product market power. We document that the value-weighted portfolios (equally-weighted portfolios) of firms with the strongest product market power generate one-year BHARs ranging from 13.96% (8.85%) to 16.90% (10.63%) higher than the portfolios of the weakest firms. The abnormal returns persist even when we control for industry concentration level (as suggested by Hou and Robinson (2006)), common firm characteristics and alternative industry classifications. The higher returns accrued to the portfolios of firms with the strongest product market power can be attributed to the higher future standardized earnings surprises generated by these firms and their lower idiosyncratic volatility.
Text
__soton.ac.uk_UDE_PersonalFiles_Users_sb1u11_mydocuments_Academic Papers EPrints & REF_SBS Papers in ePrints_Manuscript_Firm_Market_Share.doc
- Accepted Manuscript
More information
Accepted/In Press date: 26 September 2016
e-pub ahead of print date: 3 October 2016
Published date: August 2017
Keywords:
Buy-and-hold abnormal returns, Idiosyncratic risk, Product market competition, Standardized earnings surprises
Organisations:
Banking & Finance, Southampton Business School
Identifiers
Local EPrints ID: 405456
URI: http://eprints.soton.ac.uk/id/eprint/405456
ISSN: 1062-9769
PURE UUID: 7ec28297-203a-4255-acd5-c320d4834fa1
Catalogue record
Date deposited: 03 Feb 2017 16:43
Last modified: 16 Mar 2024 04:14
Export record
Altmetrics
Contributors
Author:
Thanh Ngo
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics
