Finmazing

What is Herfindahl-Hirschman Index (HHI)? HHI is a score that helps to measure market concentration and used to determine market competitiveness. HHI is named after economists Orris C. Herfindahl and Albert O. Hirschman. It is an economic concept widely applied in competition and antitrust law. A highly concentration industry is the one where only a few players dominate the industry by holding a huge market share, leading to a near-monopolistic industry. Conversely, low degree of concentration refers to near-perfect competition scenario where many companies hold small market share.   Why is HHI important to an investor? HHI helps to measure market concentration which in turns helps us to determine profitability is the industry. There is a direct relation between market concentration and profitability. Low concentration perfect market and in perfect market there is cut-throat competition. So, it is difficult for the firm to earn above average returns. High concentration indi...