On the interaction between firm level variables, the CAPM beta, and stock returns

摘要: In Chapter 1, I conduct a theoretical study of how horizontal industry concentration affects firm’s market capitalization and systematic risk. first develop method for incorporating an equilibrium theory the firm, drawn from industrial organization, into single period version Capital Asset Pricing Model (CAPM). This extension establishes microeconomic determinants risk by relating firm specific variables to Beta. Unlike previous literature, add local product shocks general, deterministic profit function use orthogonal decomposition return endogenize Cov[Ri,RM]. also this with standard Hotelling Cournot models behavior different sources uncertainty provide examples increasing can increase, decrease, be independent 2, exploit natural experiment afforded announcement ‘Paragraph IV’ patent infringement decisions. These judgments have two unique features. They create exogenous change in concentration, since they determine whether corporate owner brand name prescription drug will maintain or lose monopoly marketing rights. satisfy methodological requirements short window event study. Against backdrop contradictory empirical evidence, provides clean test empirically sign stock returns. For sample 38 District Court decisions between 1992 2006, find that is [1.24%, 2.83%] if ‘wins’ case [-5.24%, -5.82%] ‘loses’. Finally, these returns construct valuation rents pharmaceutical firms. value maintaining exclusivity 1 ‘average’ 92 months [6.48%, 8.65%]. 3, explore cross-sectional The main goals exercise understand explanatory power popular asset pricing level variables, such as coefficient variation profit. estimation relies on minimum distance approach reduces familiar least squares estimators. permits dataset where number cross sectional observations larger than time accounts measurement error sets one weighted assets, referred ‘Book’ other capitalization, ‘Market’ variables. include robust checks, which includes adding fixed effects. some striking results respect both proxy. Since my statistics are pooled over periods, cite 2001 subperiod because it has three times many rest periods combined. Turnover largest magnitude t-statistics regressions. 2001, means Beta A were .94 1.2 respectively. found deviation turnover increased .22 .25. bid ask spread percentage had ‘Market Regressions’, indicated variable .08. On hand, ln(assets), ln(size), book-to-market smallest magnitudes t-statistics. regressions indicate proxy increases (decreases) firms positive (negative) expected profit, increases. regressions, absolute proxy, .1 .15 negative ‘earnings’.