Munich Personal RePEc Archive

Bounds of Herfindahl-Hirschman index of banks in the European Union

Tóth, József (2016): Bounds of Herfindahl-Hirschman index of banks in the European Union.

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Abstract

The level of concentration can be measured by different indicators. The article overviews the calculation methods of the so called CR3 index, Gini-index and Herfindahl-Hirschman index. The paper makes evidence for existence of such upper and lower bounds of Herfindahl-Hirschman index that could be determined by sampling if the total market value and the total number of market players are known. Furthermore, it proves that the difference of the upper and lower bounds decreases if the sample is supplemented by new units of the analyzed population. In order to apply the findings, the bounds of the Herfindahl-Hirschman index of the bank market of the European Union are determined in case of total assets, own funds, net interest income and net fee income of European banks. It can be done because these aggregated values and the number of European banks are known.

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