Harmony, statistical inference with the Herfindahl H index and C index. Abacus , 39 1 , This paper examines the use of the Herfindahl H index and C index in meaures of harmony of accounting measurement practices by summarizing extent by which companies use the same accounting measures.
It explores the absence of standard accounting errors of this system, and attempts to fill this gap in the past literatures by providing formulae to estimate the standard error of the H and C indices calculated from a sample. Aggregate industry cost functions and the Herfindahl index , Dickson, V. Aggregate industry cost functions and the Herfindahl index. Estimating the herfindahl index from concentration ratio data , Michelini, C. Estimating the herfindahl index from concentration ratio data.
Journal of the American Statistical Association , 80 , This paper suggests that high concentration ratio Herfindahl H index correlations found in United States studies may be biased upward by using estimated H. Guided by income distribution studies, a new family of H estimators is proposed.
The methodology for calculating the bounds from concentration ratio data is described, and the efficacy of various estimators is tested. An empirical investigation of the critical Herfindahl index in banking , Daskin, A. An empirical investigation of the critical Herfindahl index in banking. Journal of Economics and Business , 41 2 , It approaches zero when a market is occupied by a large number of firms of relatively equal size and reaches its maximum of 10, points when a market is controlled by a single firm.
The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases. The agencies generally consider markets in which the HHI is between 1, and 2, points to be moderately concentrated, and consider markets in which the HHI is in excess of 2, points to be highly concentrated.
What are the uses of the Herfindahl-Hirschman Index? Herfindahl-Hirschman Index usage Note that the higher the market's concentration, the closer the market is to a monopoly. Generally, it is agreed that: HHI below indicates a highly competitive industry, HHI between and 1, indicates an unconcentrated industry, HHI between 1, to 2, indicates moderate market concentration, HHI above 2, indicates high market concentration. Tomasz Jedynak , PhD. Market shares you may enter up to 15 numbers.
Firm 1. Firm 2. Build vs. People also viewed…. Knowing your BMR basal metabolic weight , may help you make important decisions about your diet and lifestyle. The basic simplicity of the HHI carries some inherent disadvantages, primarily in terms of failing to define the specific market that is being examined in a proper, realistic manner. Using the basic HHI calculation, the industry would appear highly competitive. That firm would thus have nearly a total monopoly for the production and sale of that product.
Another problem in defining a market and considering market share can arise from geographic factors. This problem can occur when there are companies within an industry that have roughly equal market share, but they each operate only in specific areas of the country, so that each firm, in effect, has a monopoly within the specific marketplace in which it does business.
For these reasons, for the HHI to be properly used, other factors must be taken into consideration and markets must be very clearly defined. Tools for Fundamental Analysis. Tech Stocks.
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