Industry Concentration and Manufacturing Industries Stock Returns

The objective of this study is to investigate the impact of industryconcentration on the average stock returns, and proposing a model toexplain this relationship. Explanatory variables are Herfindahl-Hirschman Index of industry concentration, industry size (marketequity), book-to-market ratio, leverage, past 1-year's industry returnand systematic risk (beta); also the industry average return is taken asthe dependent variable. With respect to the concentration index is anindustry specific, all of the dependent and independent variables inthis research are evaluated in industry level. The study covers 1380-1386 and uses 31 manufacturing industry-year observations. Forexamine the research hypothesizes, we use the Panel Data techniquewith Fixed Effect and Generalized Least Squares (GLS) method.Results indicate that in Tehran Securities Exchange there is significantrelationship between industry concentration, size, book-to-marketratio, systematic risk and average stock returns. On the other hand,leverage and past 1-year's industry returns are not associated withannual industry returns.