IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v61y2006i4p1927-1956.html
   My bibliography  Save this article

Industry Concentration and Average Stock Returns

Author

Listed:
  • KEWEI HOU
  • DAVID T. ROBINSON

Abstract

Firms in more concentrated industries earn lower returns, even after controlling for size, book‐to‐market, momentum, and other return determinants. Explanations based on chance, measurement error, capital structure, and persistent in‐sample cash flow shocks do not explain this finding. Drawing on work in industrial organization, we posit that either barriers to entry in highly concentrated industries insulate firms from undiversifiable distress risk, or firms in highly concentrated industries are less risky because they engage in less innovation, and thereby command lower expected returns. Additional time‐series tests support these risk‐based interpretations.

Suggested Citation

  • Kewei Hou & David T. Robinson, 2006. "Industry Concentration and Average Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1927-1956, August.
    • Handle: RePEc:bla:jfinan:v:61:y:2006:i:4:p:1927-1956
    DOI: 10.1111/j.1540-6261.2006.00893.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1540-6261.2006.00893.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1540-6261.2006.00893.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:61:y:2006:i:4:p:1927-1956. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/afaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.