Quotation Dockner, Engelbert, Carlson, Murray, Fisher, Adlai, Giammarino, Ron. 2014. Leaders, Followers, and Risk Dynamics in Industry Equilibrium. Journal of Financial and Quantitative Analysis (JFQA) 49, 321-349.


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Abstract

We study the distinct impacts of own and rival actions on risk and return when firms strategically compete in the product market. Contrary to simple intuition, a competitor’s options to adjust capacity reduce own-firm risk. For example, if a rival possesses a growth option, an increase in industry demand directly enhances profits but also encourages valuereducing competitor expansion. The rival option thus acts as a natural hedge. Within the industry, we obtain endogenous differences in expected returns. In a leader-follower equilibrium, own-firm and competitor risks and required returns move together through contractions and oppositely during expansions, providing testable new predictions.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Financial and Quantitative Analysis (JFQA)
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-A, VW-B, WH-A
Language English
Title Leaders, Followers, and Risk Dynamics in Industry Equilibrium
Volume 49
Year 2014
Page from 321
Page to 349
Reviewed? Y
DOI http://dx.doi.org/10.1017/S0022109014000337

Associations

People
Dockner, Engelbert (Details)
External
Carlson, Murray (Sauder School of Business, UBC, Canada)
Fisher, Adlai (Sauder School of Business, UBC, Canada)
Giammarino, Ron (Sauder School of Business, UBC, Canada)
Organization
Institute for Finance, Banking and Insurance IN (Details)
Research Institute for Capital Markets FI (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5300 Economics (Details)
5361 Financial management (Details)
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