Competition, No-Arbitrage, and Systematic Risk

Add to your list(s) Download to your calendar using vCal

• Yuri Tserlukevich (Arizona State University) , W. P. Carey Finance, Associate Professor
• Thursday 07 March 2019, 13:00-14:00
• Castle Teaching Room, Cambridge Judge Business School.

If you have a question about this talk, please contact CERF/CF Admin.

Abstract: We study how strategic interaction among firms affects their systematic risk. Competition effectively imposes bounds on profitability within each economic sector because competing firms simultaneously scale production up or down in response to common demand shocks. We show that no arbitrage implies that exposure to systematic risk factors must be zero at these bounds, leading to an inverse U-shaped relation between systematic risk and sector profitability. In general, competition reduces systematic risk and attenuates size related asset pricing anomalies. Using trade flows between economic sectors, we construct a new measure of competition based on each sector’s dependence on input factors and find broad empirical support for the theoretical predictions.

This talk is part of the Cambridge Finance Workshop Series series.

This talk is included in these lists:

• All Talks (aka the CURE list)
• CERF and CF Events
• Cambridge Finance Workshop Series
• Cambridge Judge Business School
• Castle Teaching Room, Cambridge Judge Business School
• Interested Talks

Note that ex-directory lists are not shown.