The Current and Expected Pricing Markup as Derived from the Capital Asset Pricing Model and Tobin’s Q and Applied to the UK’s FTSE 100

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors Author try to define an approach for the definition and measurement of markup pricing using the measure of Economic Rent and The Capital Asset Pricing Model. The part of econometric model is the original and relevant with the field. Author propose an alternative approach for the calculation of price markup, related with literature but different from the previous studies.   In the conclusion section, statistical data obtained from the model are interpreted but it is not enough. It should be expanded for further studies.   References consist of current publications on the subject. 33 references were used. The majority of these references were selected from high quality journals with high citation rates.   There are 5 Tables and 6 Charts in the article. Table 3 is related with literature and the rest of the tables are about the data and econometric model results. Reliable data between the years 2018 and 2023 have been used.

 

Author Response

Thank you for your comments.  I have further emphasised that the method I outline should be applied and expanded in further studies, and that there is no reason as to why the methodology should not be generalisable to other data sets.  I also now make reference to this in the as well.

Reviewer 2 Report

Comments and Suggestions for Authors

Abstract:

1) The phrase "that that" appears twice (lines 13-14), which appears to be a typographical error.

2) Describe in more detail, albeit briefly, how your methodology differs from or improves upon existing models to highlight the innovation of the study.

3) A statement at the end of the abstract describing the broader implications of the findings or potential avenues for future research will give the reader an idea of the relevance of the study and the questions it raises.

Introduction:

1) While you mention the methodological challenges faced by previous studies, detailing how these challenges have affected the reliability of the price markup may reinforce the need for the proposed study.

2) The transition from critiquing existing methods to presenting your approach feels abrupt. A smoother transition that logically links identified gaps or shortcomings in existing research to the need for and design of the methodology would improve the flow of the narrative.

Discussion:

1) Hopefully it would be compelling to add a discussion of needs based on potential policy implications of the findings or regulatory considerations for specific industries.

2) You believe that this study is the first to make and prove that µ=Q is an important claim. The need to highlight this novelty and its implications for academic and practical applications of economic and financial theory would underline the importance of your work.

Conclusion:

1) Explain the policy implications of your findings, particularly in relation to market regulation, taxation and the monitoring of corporate financial practices. This will highlight the relevance of your research.

2) Although you have implicitly acknowledged the limitations associated with the data and methodology, explicitly stating these limitations will strengthen your conclusions. This includes any assumptions made in your analysis and how these affect the generalisability of your findings.

3) Given the significant variation in the level of price markups in different industries, an in-depth discussion of the reasons behind this variation and its implications for industry-specific policies or strategies would be useful.

Comments on the Quality of English Language

I think the whole article needs a professional touch-up.

Author Response

Thank you for your very helpful comments which  I am sure have enabled me to improve the manuscript.  I have respsonded below for each of your comments.

Abstract:

• The phrase "that that" appears twice (lines 13-14), which appears to be a typographical error.

Yes, that’s a typographical error and has been corrected.

• Describe in more detail, albeit briefly, how your methodology differs from or improves upon existing models to highlight the innovation of the study.

I have now included the fact that the previous approaches rely on marginal cost, and that my method in using economic rent and the CAPM does not. 

• A statement at the end of the abstract describing the broader implications of the findings or potential avenues for future research will give the reader an idea of the relevance of the study and the questions it raises.

I have added a short commentary to address this.

(Please note the journal’s guidance is for a maximum of 200 words in the abstract.  As such I had previously limited the abstract on that basis).

Introduction:

• While you mention the methodological challenges faced by previous studies, detailing how these challenges have affected the reliability of the price markup may reinforce the need for the proposed study.

I introduce these ideas in a new paragraph which also serves I hope a better transition between the critique and my approach – your next point (2).  With respect to the ‘reliability’ of price markup as derived from previous studies I also state that there is no perfect method given marginal costs cannot be directly observed.  We are faced without a dispositive outcome and so further methods are needed to better characterise the picture. 

• The transition from critiquing existing methods to presenting your approach feels abrupt. A smoother transition that logically links identified gaps or shortcomings in existing research to the need for and design of the methodology would improve the flow of the narrative.

I have added a short paragraph which I hope forms such a better bridge/transition.

Discussion:

• Hopefully it would be compelling to add a discussion of needs based on potential policy implications of the findings or regulatory considerations for specific industries.

I have added a substantial section to now address this (5.6 policy implications).

2) You believe that this study is the first to make and prove that µ=Q is an important claim. The need financial theory would underline the importance of your work.

Yes, the first draft did not make enough of this.  I have added a section which I hope addresses this.

Conclusion:

• Explain the policy implications of your findings, particularly in relation to market regulation, taxation and the monitoring of corporate financial practices. This will highlight the relevance of your research.

In line now with the inclusion of these arguments and points in the discussion, I have correspondingly added this in the conclusion.

• Although you have implicitly acknowledged the limitations associated with the data and methodology, explicitly stating these limitations will strengthen your conclusions. This includes any assumptions made in your analysis and how these affect the generalisability of your findings.

I have had commentary in the conclusion and so hope to have addressed this.

3) Given the significant variation in the level of price markups in different industries, an in-depth discussion of the reasons behind this variation and its implications for industry-specific policies or strategies would be useful.

I have added concluding remarks for the technology sector and those which may be subject to windfalls and for land.

Comments on the quality of English Language

I think the whole article needs a professional touch-up

I have taken advantage of the MDPI English editing service, which returned a number of proposed changes, all of which I have largely adopted.

Reviewer 3 Report

Comments and Suggestions for Authors

Dear Author,
here are some of my remarks on the text:
1. the literature needs to be expanded

2. aim of the article is not statyed clearly and no hypothesis is proposed

3. data used in the study is not described enough

4. article seems to be very technical and highly concentrated on the calculations with limited conclusions

5. Any implications of the calculations need to be added

6. limitations of the study should be addded in the results/discussion

7. mathematical proofs are not needed in my opinion

Author Response

Thank you for your comments which I am sure have helped me to improve the manuscript.  Please see below my responses to your individual points.

1. the literature needs to be expanded

This has now been expanded (there are 49 references)

2. aim of the article is not statyed clearly and no hypothesis is proposed

Six aims are included at the end of the introduction.  I have also included a further paragraph in the introduction outlining the need for further methods given the current situation lacks dispositive outcome.  Each method has its own advantages and disadvantages.

3. data used in the study is not described enough

The data used in the study are described in section three.  I have added further way in which the return to the market has been computed.

4. article seems to be very technical and highly concentrated on the calculations with limited conclusions

I have expanded the conclusion section.

5. Any implications of the calculations need to be added

I have expanded the discussion section with particular reference to policy and regulatory implications that may be indicated given the results.

6. limitations of the study should be addded in the results/discussion

I have further added to the limitations.  Please note one other reviewer had a similar point, but requested such commentary be placed in the conclusion.

7. mathematical proofs are not needed in my opinion

I defer to the editor, but believe the mathematical proof of my claim the µ=Q is required.  Else the proofs might be placed in an appendix, but I have previously noted the journal format does not seem to include the use of such.

Round 2

Reviewer 2 Report

Comments and Suggestions for Authors

All reviewer queries have been addressed adequately. Ensure no dual publication. The manuscript was presented in an intelligible fashion.

Reviewer 3 Report

Comments and Suggestions for Authors

I do not have futher comments