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Market share instability and stock price volatility during the industry life-cycle: the US automobile industry

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Author Info

  • Mariana Mazzucato

    ()
    (London Business School, Sussex Place, Regents Park, London, NW1 4SA, UK)

  • Willi Semmler

    (University of Bielefeld, D-33615 Bielefeld, Germany)

Abstract

Market share instability, during certain stages of the industry life-cycle, has become a stylized fact in the industrial organization literature. In the finance literature, volatility in the form of excess volatility, i.e. the much larger volatility of stock prices than dividends (although stock prices should in theory trace the present value of future dividends), has given rise to controversies regarding stock price determination (Campbell and Shiller, 1988; Shiller, 1989). Recent evolutionary models, both theoretical and empirical, have tied the presence of market share instability to industry specific variables, such as specific periods in the industry life-cycle and specific "technological regimes". The object of the paper is to explore whether there is a relationship between market share instability and stock price volatility and to what degree this relationship is connected to the concept of the industry life-cycle, and hence to industry specific factors. To do so, we explore the relationship in one particular industry, the US automobile industry. Since neither life-cycle nor finance theories attack this problem directly, we use insights from both approaches to build hypotheses which guide the data analysis. The empirical results confirm many of these hypotheses, suggesting that the degree of excess volatility is indeed partly affected by industry specific factors.

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Bibliographic Info

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

Volume (Year): 9 (1999)
Issue (Month): 1 ()
Pages: 67-96

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Handle: RePEc:spr:joevec:v:9:y:1999:i:1:p:67-96

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Web page: http://link.springer.de/link/service/journals/00191/index.htm

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Related research

Keywords: Market share dynamics ; Industry life-cycle ; Stock price volatility;

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Cited by:
  1. Mazzucato, Mariana, 1998. "A computational model of economies of scale and market share instability," Structural Change and Economic Dynamics, Elsevier, vol. 9(1), pages 55-83, March.
  2. Geroski, P. A. & Mazzucato, M., 2001. "Modelling the dynamics of industry populations," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1003-1022, July.
  3. Jackie Krafft & Jacques-Laurent Ravix, 2008. "Corporate governance and the governance of knowledge: rethinking the relationship in terms of corporate coherence," Post-Print hal-00203550, HAL.
  4. Marcelo Resende & Marcos Lima, 2005. "Market share instability in Brazilian industry: a dynamic panel data analysis," Applied Economics, Taylor & Francis Journals, vol. 37(6), pages 713-718.
  5. Jackie Krafft & Jacques-Laurent Ravix, 2005. "The governance of innovative firms: an evolutionary approach," Post-Print hal-00203620, HAL.

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