ABSTRACT
This chapter begins with the existence of alternative forms of how abnormal returns evolve, and provides the percentage of firms whose abnormal returns follow each path. It describes each pattern of evolution and its implications for the predictions of alternative theoretical approaches and the characteristics of firms that form each group. The differences suggest that in the more profitable group of firms and with a faster growth, differences across firms in abnormal returns are transitory and based on the successive introduction of short-run rents. Numerous theories in strategic management research and in related fields, such as industrial organization economics and organizational ecology, have proposed alternative explanations of the dynamical behavior of abnormal returns. The finite mixture approach is adequate when the studied population comprises a small number of groups with a relatively homogeneous distributions. The modeling approach could also be applied to sample data from other countries, where a different mix of firms in each class can be found.
