Abstract

This study investigates whether the competition of product market is negatively related to investors’ heterogeneous beliefs. Prior studies related with trading volume report that lowearnings quality and high－information asymmetry increase investors’ heterogeneous beliefs. Therefore, increased investors’ heterogeneous beliefs result in high－trading volume. we use trading volume as proxy on investors’ heterogeneous beliefs. The sample consists of non－financial listed KOSPI firms during 2001－2011 period. After controlling for variables related to trading volume as reported in previous studies, the regression coefficient for the competition of product market reports significant negative sign. This empirical results indicate that high－competition of product market decrease trading volume. In this respect, These results mean that competition of product market is negatively related to investors’ heterogeneous beliefs. Also we test relations between competition of product market and standard deviation of daily stock returns additionally. Additional test result, the regression coefficient for the competition of product market reports significant negative sign. Additional test result is consistent with main results. This study contributes to extant literature on competition of product market by providing evidence that competition of product market affects investor’ portfolio selection. The results may help policy makers establish policy development to lower entry barriers.

Keywords

• Competition of Product Market
• Investors’ Heterogeneous Beliefs
• Trading Volume

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