IDEAS home Printed from
   My bibliography  Save this paper

Expected Returns on Real Investments: Evidence from the Film Industry


  • Thomas Y. Powers


Asset pricers generally study the pricing of secondary market securities. Using a proprietary, project-level dataset on the film industry, I am able to study a cross-section of expected returns on real investments instead. One area in which we might expect differences is in the pricing of idiosyncratic risk. I find that expected returns are both increasing and concave in the idiosyncratic dollar variance of a film's payoff. Plotting expected returns against dollar volatility yields an approximately linear relationship, in which a $1 MM increase in volatility raises expected return by at least 43 basis points, up to as much as 116 basis points depending on the specification. I discuss several theories from corporate finance that can rationalize the pricing of idiosyncratic risk, and I build a matching model between studios and films in which costly external finance can explain both facts.

Suggested Citation

  • Thomas Y. Powers, 2014. "Expected Returns on Real Investments: Evidence from the Film Industry," Working Paper 176011, Harvard University OpenScholar.
  • Handle: RePEc:qsh:wpaper:176011

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:qsh:wpaper:176011. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Brandon). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.