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Strategic investment and industry risk dynamics

Bustamante, Maria Cecilia (2015) Strategic investment and industry risk dynamics. Review of Financial Studies, 28 (2). pp. 297-341. ISSN 0893-9454

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Identification Number: 10.1093/rfs/hhu067

Abstract

This paper characterizes how firms' strategic interaction in product markets affects the industry dynamics of investment and expected returns. In imperfectly competitive industries, a firm's exposure to systematic risk is affected by both its own investment strategy and the investment strategies of its peers, so that the dynamics of its expected returns depend on the intraindustry value spread. In the model and the data, firms' betas and returns correlate more positively in industries with low value spread, low dispersion in operating markups, and low concentration.

Item Type: Article
Official URL: http://rfs.oxfordjournals.org/
Additional Information: © 2015 Society for Financial Studies
Divisions: Finance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting; Fixed Investment and Inventory Studies
Sets: Departments > Finance
Collections > Economists Online
Date Deposited: 21 Apr 2015 08:38
Last Modified: 30 Jan 2019 19:47
URI: http://eprints.lse.ac.uk/id/eprint/46313

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