Market Share Instability and Stock Price Volatility During the Industry Life-Cycle: The Us Automobile Industry

Posted: 24 Feb 1999

See all articles by Mariana Mazzucato

Mariana Mazzucato

The Open University

Willi Semmler

The New School - Department of Economics; Universitaet Bielefeld; IIASA

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.

JEL Classification: G12, L11, O30

Suggested Citation

Mazzucato, Mariana and Semmler, Willi, Market Share Instability and Stock Price Volatility During the Industry Life-Cycle: The Us Automobile Industry. Journal of Evolutionary Economics, Vol. 9, Issue 1, 1999. Available at SSRN: https://ssrn.com/abstract=149149

Mariana Mazzucato (Contact Author)

The Open University ( email )

Walton Hall
Milton Keynes, MK7 6AA
United Kingdom
+44 1908 659191 (Phone)
+44 1908 654488 (Fax)

HOME PAGE: http://www.open.ac.uk/socialsciences/staff/people-profile.php?name=Mariana_Mazzucato

Willi Semmler

The New School - Department of Economics ( email )

65 Fifth Avenue
New York, NY 10003
United States

HOME PAGE: http://www.newschool.edu/nssr/faculty/?id=4e54-6b79-4e41-3d3d

Universitaet Bielefeld ( email )

Universit├Ątsstra├če 25
Bielefeld, NRW
Germany

IIASA ( email )

Schlossplatz 1
Laxenburg/Austria, A-2361
Austria

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