Product market competition, idiosyncratic and systematic volatility

Hussein Abdoh, Oscar Varela

Research output: Contribution to journalArticlepeer-review

40 Citations (Scopus)

Abstract

This study finds that competition increases idiosyncratic volatility relative to systematic volatility. Market power facilitates passing on firm specific cost shocks to customers but is irrelevant to passing on market cost shocks. A firm's competitive advantage in an industry is also more affected by changes in firm specific costs when there are many rivals. The results are robust to significant reductions in import tariff rates that reduce market power and consistent with lower pairwise returns' correlations following such events.

Original languageEnglish
Pages (from-to)500-513
Number of pages14
JournalJournal of Corporate Finance
Volume43
DOIs
Publication statusPublished - Apr 1 2017

Keywords

  • Idiosyncratic volatility
  • Pairwise stock-returns' correlations
  • Product market competition
  • Systematic volatility

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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