equity: Herfindahl Index equity, number, remember

dandman

I remember the formula is sum(weght(i)^2), why some time we could take the 1/ HHI to get the total number of equal size firm? Thanks.

wilslm

but HHI is from that weight ^2, not simply the weight. that is why I don't understand why 1/HHI could get total number of the firm......

Chuckrox8 Wrote:
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> Because HHI, your denominator is essentially the
> proportionate share that one firm has with the
> market. If you assume that all firms are equal
> size then a firm with 2% mkt share would result in
> 1/.02= 50 comparable size firms.

ayodayo

Because HHI, your denominator is essentially the proportionate share that one firm has with the market. If you assume that all firms are equal size then a firm with 2% mkt share would result in 1/.02= 50 comparable size firms.