Abstract

http://ssrn.com/abstract=1463888
 
 

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Professor Zipf Goes to Wall Street


Yannick Malevergne


University of Saint Etienne - Graduate School of Economics and Business Administration (ISEAG); EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control

Pedro Santa-Clara


New University of Lisbon - Nova School of Business and Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Didier Sornette


Swiss Finance Institute; ETH Zurich

August 2009

NBER Working Paper No. w15295

Abstract:     
The heavy-tailed distribution of firm sizes first discovered by Zipf (1949) is one of the best established empirical facts in economics. We show that it has strong implications for asset pricing. Due to the concentration of the market portfolio when the distribution of the capitalization of firms is sufficiently heavy-tailed, an additional risk factor generically appears even for very large economies. Our two-factor model is as successful empirically as the three-factor Fama-French model.

Number of Pages in PDF File: 34

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Date posted: August 31, 2009  

Suggested Citation

Malevergne, Yannick and Santa-Clara, Pedro and Sornette, Didier, Professor Zipf Goes to Wall Street (August 2009). NBER Working Paper No. w15295. Available at SSRN: http://ssrn.com/abstract=1463888

Contact Information

Yannick Malevergne (Contact Author)
University of Saint Etienne - Graduate School of Economics and Business Administration (ISEAG) ( email )
2, Rue Tréfilerie
F-42023 St. Etienne Cedex 2
France
EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control ( email )
23 av. Guy de Collongue BP 174
69132 Ecully Cedex
France
HOME PAGE: http://www.em-lyon.com/english/faculty/professors/efc/malevergne/index.aspx
Pedro Santa-Clara
New University of Lisbon - Nova School of Business and Economics ( email )
Lisbon
Portugal
HOME PAGE: http://docentes.fe.unl.pt/~psc/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Didier Sornette
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
ETH Zurich ( email )
Department of Management, Technology and Economics
Scheuchzerstrasse 7
8092 Zurich
Switzerland
41446328917 (Phone)
41446321914 (Fax)
HOME PAGE: http://www.er.ethz.ch/
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