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Market share instability and stock price volatility during the industry life-cycle: The US automobile industry

Mazzucato, Mariana and Semmler, Willi (1999). Market share instability and stock price volatility during the industry life-cycle: The US automobile industry. Journal of Evolutionary Economics, 9(1) pp. 67–96.

DOI (Digital Object Identifier) Link: http://dx.doi.org/10.1007/s001910050075
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Abstract

Market share instability, during certain stages of the industry life-cycle, has become a stylized fact in the industrial organization literature. In the finance literature, volatility in the form of excess volatility, i.e. the much larger volatility of stock prices than dividends (although stock prices should in theory trace the present value of future dividends), has given rise to controversies regarding stock price determination (Campbell and Shiller, 1988; Shiller, 1989). Recent evolutionary models, both theoretical and empirical, have tied the presence of market share instability to industry specific variables, such as specific periods in the industry life-cycle and specific "technological regimes". The object of the paper is to explore whether there is a relationship between market share instability and stock price volatility and to what degree this relationship is connected to the concept of the industry life-cycle, and hence to industry specific factors. To do so, we explore the relationship in one particular industry, the US automobile industry. Since neither life-cycle nor finance theories attack this problem directly, we use insights from both approaches to build hypotheses which guide the data analysis. The empirical results confirm many of these hypotheses, suggesting that the degree of excess volatility is indeed partly affected by industry specific factors.

Item Type: Journal Article
Copyright Holders: 1999 Springer
ISSN: 0936-9937
Academic Unit/Department: Social Sciences > Economics
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Item ID: 22208
Depositing User: Users 9 not found.
Date Deposited: 02 Jul 2010 12:34
Last Modified: 08 Jun 2012 09:30
URI: http://oro.open.ac.uk/id/eprint/22208
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