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Modeling Movie Success When ‘Nobody Knows Anything’: Conditional Stable-Distribution Analysis Of Film Returns

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  • W. Walls

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Abstract

In this paper we apply a recently-developed statistical model that explicitly accounts for the extreme uncertainty surrounding film returns. The conditional distribution of box-office returns is analyzed using the stable distribution regression model. The regression coefficients in this model represent what is known about the correlates of film success while at the same time permitting the variance of film success at the box office to be infinite. The empirical analysis shows that the conditional distribution of film returns has infinite variance, and this invalidates statistical inferences from the often-applied least-squares regression model. The estimates of the stable regression confirm some earlier results on the statistics of the movie business and the analysis demonstrates how to model box-office success in the movie business where “nobody knows anything”. Copyright Springer Science + Business Media, Inc. 2005

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Bibliographic Info

Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 29 (2005)
Issue (Month): 3 (August)
Pages: 177-190

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Handle: RePEc:kap:jculte:v:29:y:2005:i:3:p:177-190

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Web page: http://www.springerlink.com/link.asp?id=100284

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Keywords: motion picture success; Pareto-Lévy stable distribution; nobody knows principle;

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References

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  1. Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
  2. De Vany, A. & Walls, W.D., 2000. "Does Hollywood make too many R-Rated Movies? Risk, Stochastic Dominance, and the Illusion of Expectation," Papers 99-00-24, California Irvine - School of Social Sciences.
  3. Chris Hand, 2002. "The Distribution and Predictability of Cinema Admissions," Journal of Cultural Economics, Springer, vol. 26(1), pages 53-64, February.
  4. Steven Albert, 1998. "Movie Stars and the Distribution of Financially Successful Films in the Motion Picture Industry," Journal of Cultural Economics, Springer, vol. 22(4), pages 249-270, December.
  5. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
  6. Arthur De Vany & W. Walls, 1999. "Uncertainty in the Movie Industry: Does Star Power Reduce the Terror of the Box Office?," Journal of Cultural Economics, Springer, vol. 23(4), pages 285-318, November.
  7. Benoit Mandelbrot, 1963. "New Methods in Statistical Economics," Journal of Political Economy, University of Chicago Press, vol. 71, pages 421.
  8. De Vany, Arthur S. & Walls, W. David, 2004. "Motion picture profit, the stable Paretian hypothesis, and the curse of the superstar," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1035-1057, March.
  9. Victor Ginsburgh, 2001. "Economics of arts and culture," ULB Institutional Repository 2013/1869, ULB -- Universite Libre de Bruxelles.
  10. De Vany, Arthur & Walls, W David, 1996. "Bose-Einstein Dynamics and Adaptive Contracting in the Motion Picture Industry," Economic Journal, Royal Economic Society, vol. 106(439), pages 1493-1514, November.
  11. Blattberg, Robert & Sargent, Thomas J, 1971. "Regression with Non-Gaussian Stable Disturbances: Some Sampling Results," Econometrica, Econometric Society, vol. 39(3), pages 501-10, May.
  12. Eugene F. Fama, 1963. "Mandelbrot and the Stable Paretian Hypothesis," The Journal of Business, University of Chicago Press, vol. 36, pages 420.
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Citations

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Cited by:
  1. Allègre Hadida, 2010. "Commercial success and artistic recognition of motion picture projects," Journal of Cultural Economics, Springer, vol. 34(1), pages 45-80, February.
  2. W. David Walls, 2004. "Revenues, Profitability, and Returns: Clinical Analysis of the Market for Mobster Films," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 3(2), pages 93-106, August.
  3. Arthur Vany & W. Walls, 2007. "Estimating the Effects of Movie Piracy on Box-office Revenue," Review of Industrial Organization, Springer, vol. 30(4), pages 291-301, June.
  4. John Sedgwick & Michael Pokorny, 2010. "Consumers as risk takers: Evidence from the film industry during the 1930s," Business History, Taylor & Francis Journals, vol. 52(1), pages 74-99.
  5. Sumiko Asai, 2011. "Demand analysis of hit music in Japan," Journal of Cultural Economics, Springer, vol. 35(2), pages 101-117, May.
  6. Jordi McKenzie, 2010. "How do theatrical box office revenues affect DVD retail sales? Australian empirical evidence," Journal of Cultural Economics, Springer, vol. 34(3), pages 159-179, August.
  7. Chien-Ping Chen, 2009. "A Puzzle or a Choice: Uniform Pricing for Motion Pictures at the Box," Atlantic Economic Journal, International Atlantic Economic Society, vol. 37(1), pages 73-85, March.
  8. Jordi McKenzie, 2009. "Revealed word-of-mouth demand and adaptive supply: survival of motion pictures at the Australian box office," Journal of Cultural Economics, Springer, vol. 33(4), pages 279-299, November.
  9. Frederick Derrick & Nancy Williams & Charles Scott, 2014. "A two-stage proxy variable approach to estimating movie box office receipts," Journal of Cultural Economics, Springer, vol. 38(2), pages 173-189, May.
  10. Ana Suárez-Vázquez, 2011. "Critic power or star power? The influence of hallmarks of quality of motion pictures: an experimental approach," Journal of Cultural Economics, Springer, vol. 35(2), pages 119-135, May.
  11. Jordi McKenzie, 2010. "Do 'African American' films perform better or worse at the box office? An empirical analysis of motion picture revenues and profits," Applied Economics Letters, Taylor & Francis Journals, vol. 17(16), pages 1559-1564.
  12. Liran Einav & S. Ravid, 2009. "Stock market response to changes in movies’ opening dates," Journal of Cultural Economics, Springer, vol. 33(4), pages 311-319, November.
  13. Brinja Meiseberg & Thomas Ehrmann, 2013. "Diversity in teams and the success of cultural products," Journal of Cultural Economics, Springer, vol. 37(1), pages 61-86, February.
  14. McKenzie, Jordi, 2013. "Predicting box office with and without markets: Do internet users know anything?," Information Economics and Policy, Elsevier, vol. 25(2), pages 70-80.

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