Stock market volatility and market share instability during the US automobile industry life-cycle

Mazzucato, Mariana and Semmler, Willi (1999) Stock market volatility and market share instability during the US automobile industry life-cycle. Journal of Evolutionary Economics, 9 (1). pp. 67-96. ISSN 0936-9937

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Abstract

Market share instability, during certain stages of the industry life-cycle, has become a stylized fact in the industrial organization literature. In the finance literature, volatility in the form of excess volatility, i.e. the much larger volatility of stock prices than dividends (although stock prices should in theory trace the present value of future dividends), has given rise to controversies regarding stock price determination (Campbell and Shiller, 1988; Shiller, 1989). Recent evolutionary models, both theoretical and empirical, have tied the presence of market share instability to industry specific variables, such as specific periods in the industry life-cycle and specific “technological regimes”. The object of the paper is to explore whether there is a relationship between market share instability and stock price volatility and to what degree this relationship is connected to the concept of the industry life-cycle, and hence to industry specific factors. To do so, we explore the relationship in one particular industry, the US automobile industry. Since neither life-cycle nor finance theories attack this problem directly, we use insights from both approaches to build hypotheses which guide the data analysis. The empirical results confirm many of these hypotheses, suggesting that the degree of excess volatility is indeed partly affected by industry specific factors.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: H Social Sciences
Depositing User: Joy Blake
Date Deposited: 06 Jan 2015 15:52
Last Modified: 06 Jan 2015 15:52
URI: http://sro.sussex.ac.uk/id/eprint/51853
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