Market Power, Efficiency and the Dispersion of Systematic Risk

Market Power, Efficiency and the Dispersion of Systematic Risk A number of studies have used the Capital Asset Pricing Model (CAPM) to integrate product market and financial theories of the firm. We reexamine the relationship between product market structure and systematic risk at the firm and industry level. We show that theory yields no testable implications at the firm level. We show, however, that there is a relationship between the intraindustry dispersion of systematic risk and industry concentration which depends on the causes and consequences of concentration. Estimates of the relationship between the intraindustry variance of β and concentration for a 1987 cross-section of U.S. industries suggest that concentration allows larger firms to exercise market power. Review of Industrial Organization Springer Journals

Market Power, Efficiency and the Dispersion of Systematic Risk

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Kluwer Academic Publishers
Copyright © 1999 by Kluwer Academic Publishers
Economics; Industrial Organization; Microeconomics
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  • Beta, Firm Size and Concentration
    Binder, J.
  • The Determinants of Systematic Risk: A Synthesis
    Callahan, C. M.; Mohr, R.

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