The persistence of abnormal returns at industry and firm levels
The 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.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dennis Mueller & Burkhard Raunig, 1999.
"Heterogeneities within Industries and Structure-Performance Models,"
Review of Industrial Organization,
Springer;The Industrial Organization Society, vol. 15(4), pages 303-320, December.
- Dennis Mueller & Burkhard Raunig, 1998. "Heterogeneities within industries and structure-performance models," Working Papers 36, Oesterreichische Nationalbank (Austrian Central Bank).
- Schwalbach, Joachim & Gra[beta]hoff, Ulrike & Mahmood, Talat, 1989. "The dynamics of corporate profits," European Economic Review, Elsevier, vol. 33(8), pages 1625-1639, October.
- Peltzman, Sam, 1977. "The Gains and Losses from Industrial Concentration," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 229-263, October.
- Sam Peltzman, 1977. "The Gains and Losses From Industrial Concentration," NBER Working Papers 0163, National Bureau of Economic Research, Inc.
- Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-389, June.
- Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
- Satorra, Albert, 2002. "Asymptotic Robustness In Multiple Group Linear-Latent Variable Models," Econometric Theory, Cambridge University Press, vol. 18(02), pages 297-312, April.
- L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
- Demsetz, Harold, 1979. "Accounting for Advertising as a Barrier to Entry," The Journal of Business, University of Chicago Press, vol. 52(3), pages 345-360, July.
- Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 427-442, June.
- Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592, February.
- Mueller,Dennis C., 1986. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521306935.
- Peter W Roberts, 2001. "Innovation and firm-level persistent profitability: a Schumpeterian framework," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 239-250.
- Schmalensee, Richard, 1985. "Do Markets Differ Much?," American Economic Review, American Economic Association, vol. 75(3), pages 341-351, June.
- Schmalensee, Richard., 1984. "Do markets differ much?," Working papers 1531-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Anita M. McGahan & Michael E. Porter, 2002. "What Do We Know About Variance in Accounting Profitability?," Management Science, INFORMS, vol. 48(7), pages 834-851, July.
- Robert Jacobson & Gary Hansen, 2001. "Modeling the competitive process," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 251-263.
- Fisher, Franklin M & McGowan, John J, 1983. "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, American Economic Association, vol. 73(1), pages 82-97, March.
- S.A. Lippman & R.P. Rumelt, 1982. "Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 418-438, Autumn.
- Mueller, Dennis C, 1977. "The Persistence of Profits above the Norm," Economica, London School of Economics and Political Science, vol. 44(176), pages 369-380, November.
- Benston, George J, 1985. "The Validity of Profits-Structure Studies with Particular Reference to the FTC's Line of Business Data," American Economic Review, American Economic Association, vol. 75(1), pages 37-67, March.
- Waring, Geoffrey F, 1996. "Industry Differences in the Persistence of Firm-Specific Returns," American Economic Review, American Economic Association, vol. 86(5), pages 1253-1265, December. Full references (including those not matched with items on IDEAS)