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Product market competition and stock return dependence

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  • Asgharian, Hossein
  • Liu, Lu

Abstract

We model the spillover effect between competing firms’ daily idiosyncratic stock returns, using spatial econometric techniques. Contagion effect from rival firms dominates competitive effect, and the net effect is larger from negative return shocks of rival firms than from positive ones. The net effect is strong for firms in product markets with low concentration and high product market fluidity.

Suggested Citation

  • Asgharian, Hossein & Liu, Lu, 2022. "Product market competition and stock return dependence," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004123
    DOI: 10.1016/j.frl.2022.103207
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    References listed on IDEAS

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    1. Kewei Hou, 2007. "Industry Information Diffusion and the Lead-lag Effect in Stock Returns," Review of Financial Studies, Society for Financial Studies, vol. 20(4), pages 1113-1138.
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