Competition, Markups, and Predictable Returns

• 成果类型: Article
• 署名作者: Corhay, Alexandre; Kung, Howard; Schmid, Lukas
• 署名单位: University of Toronto; University of London; London Business School; Center for Economic & Policy Research (CEPR); University of Southern California; Duke University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa054
• 发表日期: 2020
• 页码: 5906
• 关键词: long-run risk; product variety; asset; consumption; INVESTMENT; DYNAMICS; BEHAVIOR; entry; FIRMS; price

摘要

This paper jointly examines the link between competition and expected returns in the time series and in the cross-section. To this end, we build a general equilibrium model where markups vary because of firm entry with oligopolistic competition. When concentration is high, markups are more sensitive to entry risk. We find that higher markups are associated with higher expected returns over time and across industries, in line with the data. The model can also quantitatively account for the persistent rise in aggregate risk premiums and macroeconomic volatility associated with the secular increase trend industry concentration since the mid-1980s.