CFA Level I · CFA Level I Exam · The Firm and Market Structures
In a market, five firms have sales of 40%, 25%, 15%, 12% and 8% of total industry sales. The Herfindahl-Hirschman Index (HHI), using shares expressed in percentage points, is closest to:
The HHI is 2,658, found by squaring each share in percentage points and summing them. None of the listed values equals this result.
- A100
- B2,258Correct
- C4,000
Explanation
HHI = 40² + 25² + 15² + 12² + 8² = 1,600 + 625 + 225 + 144 + 64 = 2,658. Check: 1,600+625=2,225; +225=2,450; +144=2,594; +64=2,658. The closest option is therefore not 2,258, so the options must be corrected.
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