The persistence of abnormal returns at industry and firm levels
AbstractThe present paper proposes a model for the persistence of abnormal returns both at firm and industry levels, when longitudinal data for the profits of firms classiffied as industries are available. The model produces a two- way variance decomposition of abnormal returns: (a) at firm versus industry levels, and (b) for permanent versus transitory components. This variance decomposition supplies information on the relative importance of the fundamental components of abnormal returns that have been discussed in the literature. The model is applied to a Spanish sample of firms, obtaining results such as: (a) there are significant and permanent differences between profit rates both at industry and firm levels; (b) variation of abnormal returns at firm level is greater than at industry level; and (c) firm and industry levels do not differ significantly regarding rates of convergence of abnormal returns.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 729.
Date of creation: Nov 2003
Date of revision:
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Web page: http://www.econ.upf.edu/
Returns of assets; abnormal returns; persistence; two-level; structural equations;
Find related papers by JEL classification:
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
- NEP-COM-2004-05-16 (Industrial Competition)
- NEP-EEC-2004-05-16 (European Economics)
- NEP-ENT-2004-05-26 (Entrepreneurship)
- NEP-FIN-2004-05-16 (Finance)
- NEP-FMK-2004-05-16 (Financial Markets)
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