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Return
Competition, Markups, and Predictable Returns
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OA
AI
DOI：10.1093/rfs/hhaa054.png)
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Abstract
En 中文
This paper jointly examines the link between competition and expected returns in the time series and in the cross-section. To this end, we build a general equilibrium model where markups vary because of firm entry with oligopolistic competition. When concentration is high, markups are more sensitive to entry risk. We find that higher markups are associated with higher expected returns over time and across industries, in line with the data. The model can also quantitatively account for the persistent rise in aggregate risk premiums and macroeconomic volatility associated with the secular increase trend industry concentration since the mid-1980s.
Keywords:
LONG-RUN RISK
PRODUCT VARIETY
ASSET
CONSUMPTION
INVESTMENT
DYNAMICS
BEHAVIOR
ENTRY
FIRMS
PRICE
Journal
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5.4
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2.8K
Citations:
3.0W
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