Abstract
We compare the buy-and-hold abnormal returns (BHARs) among the deciles portfolios of firms based on their product market power. We document that the value-weighted portfolios (equally-weighted portfolios) of firms with the strongest product market power generate one-year BHARs ranging from 13.96% (8.85%) to 16.90% (10.63%) higher than the portfolios of the weakest firms. The abnormal returns persist even when we control for industry concentration level (as suggested by Hou and Robinson (2006)), common firm characteristics and alternative industry classifications. The higher returns accrued to the portfolios of firms with the strongest product market power can be attributed to the higher future standardized earnings surprises generated by these firms and their lower idiosyncratic volatility.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
