Author(s): Côrte-Real, Filipe José Correia
Date: 2013
Persistent ID: http://hdl.handle.net/10362/9840
Origin: Repositório Institucional da UNL
Subject(s): Industry size; Industry concentration; Risk premium; Three-factor model
Author(s): Côrte-Real, Filipe José Correia
Date: 2013
Persistent ID: http://hdl.handle.net/10362/9840
Origin: Repositório Institucional da UNL
Subject(s): Industry size; Industry concentration; Risk premium; Three-factor model
A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics
Average stock returns on industry portfolios are related to industry total market equity and industry market equity concentration. Small industries outperform large industries marginally, while high-concentration industries outperform low-concentration industries significantly. The industry concentration premium persists after controlling for firm size and book-to-market equity ratio. A three-factor model using risk factors associated to industry size and industry concentration compares well to the Fama-French three-factor model, capturing return variation of portfolios formed on industry size, concentration, book-to-market equity, debt-to-equity, dividend-to-price, and earnings-to-price. My results are consistent with traditional economic theory and industry strategic analysis.