In this dissertation, I examine the relationship between market structure and average stock returns in the London Stock Exchange during 1985 and 2010. Using Multifactor asset pricing theory, I test whether industry concentration is a new asset pricing factor in addition to conventional risk factors such as beta, size, book-to-market equity, momentum, and leverage. I find that industry concentration is negatively related to average stock returns in all Fama-MacBeth cross-sectional regressions, even after controlling for beta, size, book-to-market equity, momentum, and leverage. In addition, there is strong evidence of a growth effect. Firms or industry portfolios with smaller book-to-market equity ratios have significantly higher returns. In contrast, beta is never statistically significant. The above results are robust to firm- and industry-level regressions, and the formation of firms into 100 size-beta portfolios. The time-series results show some evidence that industry concentration premium contains separate information compared with other risk premiums or risk factors and helps explain the time-series variation in stock returns, even after accounting for the premiums of beta, size, book-to-market, momentum, and leverage. The empirical findings indicate that competitive industries earn, on average, higher risk-adjusted returns than concentrated industries. An explanation is that investors in more competitive industries require larger return premiums for greater distress risks associated with these industries.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:549136 |
| Date | January 2011 |
| Creators | Hashem, Nawar |
| Contributors | Su, Dong-Wei ; Stojanovic, Aleksandar |
| Publisher | University of Greenwich |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://gala.gre.ac.uk/8055/ |
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