International Journal of Business and Economics

International Journal of Business and Economics
Volume 17, No. 2

September, 2018
At the Movies: Some Stylized Facts on Investment Returns and Consumption Patterns
Lee Yoong Hon
Nottingham University Business School, The University of Nottingham Malaysia Campus, Malaysia
Ruth Lim Sheau Yen
School of Social Sciences, Heriot-Watt University, Malaysia
This article examines the impact of a movie's budget on its profitability by measuring movie profitability using its return on investment (ROI). With a dataset comprising 3309 movies, we find that a movie's ROI negatively correlates to its production budget. Our findings further reveal that its ROI is highest in the category of low budget films when compared to other groups of different budget categories, i.e., moderate, big, and mega budget. In terms of an investment portfolio strategy, we argue that the better option for movie studios is to concentrate more on smaller-scale film projects instead of investing heavily in major productions, or at the very least, to consider having a more balanced portfolio in order to realize greater overall returns.
Keywords:return on investment, production budget, movie industry, box office, consumption pattern.
JEL Classifications:L80, M20, M21.