Journal of Evolutionary Economics

, Volume 9, Issue 1, pp 67–96

Market share instability and stock price volatility during the industry life-cycle: the US automobile industry

  • Mariana Mazzucato
  • Willi Semmler
Article

DOI: 10.1007/s001910050075

Cite this article as:
Mazzucato, M. & Semmler, W. J Evol Econ (1999) 9: 67. doi:10.1007/s001910050075

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.

Key words: Market share dynamics Industry life-cycle Stock price volatility 
JEL-classification: L11; 030; G12 

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Copyright information

© Springer-Verlag Berlin Heidelberg 1999

Authors and Affiliations

  • Mariana Mazzucato
    • 1
  • Willi Semmler
    • 3
  1. 1.London Business School, Sussex Place, Regents Park, London, NW1 4SA, UK (e-mail: Mmazzucato@lbs.ac.uk)GB
  2. 2.Department of Economics, University of Denver, CO 80208–2685, USAUS
  3. 3.University of Bielefeld, D-33615 Bielefeld, GermanyDE
  4. 4.Graduate Faculty of the New School for Social Research, 65 Fifth Avenue, New York, NY 10003, USA (e-mail: SemmlerW@newschool.edu)US

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