Superstars without talent? The Yule distribution controversy

Chung and Cox (1994) provided an intuitively appealing stochastic model which indicates that superstars may exist regardless of talent and which gives rise to the Yule distribution. We adopt a different empirical approach and test its goodness-of-fit using a parametric bootstrap and several powerful test statistics. Just like the discrete Pareto distribution, it is overwhelmingly rejected: it is a fairly accurate approximation of the lower quantiles of the superstar distribution, but overestimates the snowball effect that makes consumers purchase records of the most successful artists. In other words, the Yule distribution captures stardom, but not superstardom. A generalization of the Yule distribution provides an excellent fit in two of the three data sets. JEL classifications: J31, L82, Z11 SSE/EFI Working Paper Series in Economics and Finance, No. 658 This version: December 5, 2007 Corresponding author. Department of Economics, Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden. E-mail: [email protected]. Tel: +46-8-736 92 17. Fax: +46-8-31 32 07. We thank Daron Acemoglu for advice, and two anonymous referees, Moshe Adler, Kee Chung, David Giles, Antonello Scorcu, and several audiences for comments. We also thank David Giles for permission to reproduce his data sets and Kee Chung for permission to include parts of his correspondence. Financial support of the Netherlands Foundation for Scientific Research (NWO) and the Wallander/Hedelius Foundation is gratefully acknowledged.