Skip Navigation

Strategic Investment and Industry Risk Dynamics

  1. M. Cecilia Bustamante
  1. University of Maryland and London School of Economics
  1. Send correspondence to M. Cecilia Bustamante, University of Maryland, 4428 Van Munching Hall, College Park, MD 20742, USA; telephone: (301) 405-7934. E-mail: mcbustam{at}rhsmith.umd.edu.

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.

JEL

JEL codes

| Table of Contents

This Article

  1. Rev. Financ. Stud. 28 (2): 297-341. doi: 10.1093/rfs/hhu067 First published online: September 21, 2014
  1. » AbstractFree
  2. Full Text (HTML)Free
  3. Full Text (PDF)Free
  4. All Versions of this Article:
    1. hhu067v1
    2. hhu067v2
    3. 28/2/297 most recent

Classifications

  1. Series:
    • Editor's Choice

Share

  1. Email this article

Current Issue

  1. December 2016 29 (12)
  1. Review of Financial Studies
  1. Alert me to new issues

Most

Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.