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Competition, Markups, and Predictable Returns

delete2020-05-09
delete18
delete
OA
AI
H
Howard Kung
L
Lukas Schmid *
DOI：10.1093/rfs/hhaa054delete
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Abstract

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
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Journal

Review of Financial Studies cover
Review of Financial Studies
IF:
5.4
Papers:
2.8K
Citations:
3.0W

Organization

L
London Business School
Scholars:
502
Papers: 525
Citations: 3.4K
U
university of london
Scholars:
21.5W
Papers: 19.7W
Citations: 305
U
university of toronto
Scholars:
14.7W
Papers: 12.0W
Citations: 165
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