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Beta, Firm Size, and Concentration

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  • Binder, John J

Abstract

The asset beta of a firm is defined as the uncertainty about the firm's future value scaled by its current value. Empirically, beta is negatively related to a firm's size and concentration in its major product market. This relation has been interpreted as evidence that monopoly power affects beta. This paper shows that this empirical result is also consistent with competitive product markets where greater firm size and concentration are due to greater efficiency in production. Thus, the correlation between beta, firm size, and concentration is not prima facie evidence of widespread monopoly power. Copyright 1992 by Oxford University Press.

Suggested Citation

  • Binder, John J, 1992. "Beta, Firm Size, and Concentration," Economic Inquiry, Western Economic Association International, vol. 30(3), pages 556-563, July.
    • Handle: RePEc:oup:ecinqu:v:30:y:1992:i:3:p:556-63
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    Cited by:

    1. Mykhaylo Shkolnikov & Lane Chun Yeung, 2024. "From rank-based models with common noise to pathwise entropy solutions of SPDEs," Papers 2406.07286, arXiv.org.
    2. Fabian Hollstein & Marcel Prokopczuk & Christoph Matthias Würsig, 2024. "Market power and systematic risk," Financial Management, Financial Management Association International, vol. 53(2), pages 233-266, June.
    3. Qadan, Mahmoud & Aharon, David Y., 2019. "Can investor sentiment predict the size premium?," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 10-26.

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