Strategy #0000000080 · Industry structure and equity factors
Industry concentration and competitive structure
Enter the top-three and remaining market shares (total 100%), number of other firms and returns; the remainder is evenly split to approximate HHI.
Industry concentration is often measured by the Herfindahl–Hirschman Index (HHI), the sum of squared market shares. Hou and Robinson study a link between competition and equity returns; concentration may reduce innovation risk while also creating market power and entry barriers. Market definitions, product boundaries and conglomerate treatment change HHI.
HHI depends on industry boundaries and share estimates; concentration does not causally determine returns.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
What HHI follows from market shares, and what spread is assumed across concentration groups?
Industry concentration is often measured by the Herfindahl–Hirschman Index (HHI), the sum of squared market shares. Hou and Robinson study a link between competition and equity returns; concentration may reduce innovation risk while also creating market power and entry barriers. Market definitions, product boundaries and conglomerate treatment change HHI.
Enter the top-three and remaining market shares (total 100%), number of other firms and returns; the remainder is evenly split to approximate HHI.
HHI depends on industry boundaries and share estimates; concentration does not causally determine returns.
- Signal inputEnter the top-three and remaining market shares (total 100%), number of other firms and returns; the remainder is evenly split to approximate HHI.
- Net scenarioHHI depends on industry boundaries and share estimates; concentration does not causally determine returns.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
HHI=\sum_{i=1}^{3}s_i^2+\frac{s_{other}^2}{N_{other}},\quad R_{LS}=R_{low\ concentration}-R_{high\ concentration}-C
s_i is each firm’s market share as a fraction; normalised HHI ranges from 0 to 1; the example evenly splits the remaining share.
Greeks: the directional intuition
- 產業邊界
- Measures sensitivity to implied volatility.
- 衡量誤差
- Measures sensitivity to implied volatility.
- 混淆因素
- Measures sensitivity to implied volatility.
HHI=\sum_{i=1}^{3}s_i^2+\frac{s_{other}^2}{N_{other}},\quad R_{LS}=R_{low\ concentration}-R_{high\ concentration}-C
Practical context · published observations
Industry concentration and competitive structure: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
HHI depends on industry boundaries and share estimates; concentration does not causally determine returns. Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related methods differ in event and signal definitions.
Compare the rule, data and execution assumptions.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Core signal | Event / metric rule | Industry concentration is often measured by the Herfindahl–Hirschman Index (HHI), the sum of squared market shares. Hou and Robinson study a link between competition and equity returns; concentration may reduce innovation risk while also creating market power and entry barriers. Market definitions, product boundaries and conglomerate treatment change HHI. | HHI depends on industry boundaries and share estimates; concentration does not causally determine returns. |
| Conditional sort | Portfolio comparison | Sort companies on information available at the time. | Breakpoints and sample size affect results. |
| Multi-signal version | Factor combination | Combine another quality or event signal. | May add collinearity and multiple-testing risk. |
HHI depends on industry boundaries and share estimates; concentration does not causally determine returns.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.