At the Movies: Some Stylized Facts on Investment Returns and Consumption Patterns

This article examines the impact of a movie5s 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.