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Contrasting Trends in Firm Volatility

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  • David Thesmar
  • Mathias Thoenig

Abstract

Over the past decades, the real and financial volatility of listed firms has increased, while the volatility of private firms has decreased. We first provide panel data evidence that, at the firm level, sales and employment volatility are impacted by changes in the degree of ownership concentration. We then construct a model with private and listed firms where risk-taking is a choice variable at the firm-level. Due to general equilibrium feedback, we find that both an increase in stock market participation and integration in international capital markets generate opposite trends in volatility for private and listed firms. (JEL G15, G32, L25)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 3 (2011)
Issue (Month): 4 (October)
Pages: 143-80

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Handle: RePEc:aea:aejmac:v:3:y:2011:i:4:p:143-80

Note: DOI: 10.1257/mac.3.4.143
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References

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  1. Kenneth R. French, 2008. "Presidential Address: The Cost of Active Investing," Journal of Finance, American Finance Association, vol. 63(4), pages 1537-1573, 08.
  2. Coeurdacier, Nicolas, 2006. "Do Trade Costs in Goods Market Lead to Home Bias in Equities?," ESSEC Working Papers DR 06011, ESSEC Research Center, ESSEC Business School.
  3. Lubos Pastor & Robert F. Stambaugh, 2000. "The Equity Premium and Structural Breaks," NBER Working Papers 7778, National Bureau of Economic Research, Inc.
  4. Sraer, David & Thesmar, David, 2004. "Performance and Behaviour of Family Firms: Evidence from the French Stock Market," CEPR Discussion Papers 4520, C.E.P.R. Discussion Papers.
  5. John Y. Campbell, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Journal of Finance, American Finance Association, vol. 56(1), pages 1-43, 02.
  6. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
  7. Anusha Chari & Peter Blair Henry, 2004. "Risk Sharing and Asset Prices: Evidence from a Natural Experiment," Journal of Finance, American Finance Association, vol. 59(3), pages 1295-1324, 06.
  8. Fama, Eugene F. & French, Kenneth R., 2004. "New lists: Fundamentals and survival rates," Journal of Financial Economics, Elsevier, vol. 73(2), pages 229-269, August.
  9. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g708n2m4m is not listed on IDEAS
  10. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction And Firm Organization Choice," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1201-1237, November.
  11. Diego A. Comin & Thomas Philippon, 2006. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 167-228 National Bureau of Economic Research, Inc.
  12. David Thesmar & Mathias Thoenig, 2007. "From Flexibility to Insecurity: How Vertical Separation Amplifies Firm-level Uncertainty," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1161-1202, December.
  13. Kopczuk, Wojciech & Saez, Emmanuel, 2004. "Top Wealth Shares in the United States, 1916-2000: Evidence from Estate Tax Returns," National Tax Journal, National Tax Association, vol. 57(2), pages 445-87, June.
  14. James A. Kahn & Margaret M. McConnell & Gabriel Perez-Quiros, 2002. "On the causes of the increased stability of the U.S. economy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 183-202.
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Cited by:
  1. di Giovanni, Julian & Levchenko, Andrei A. & Mejean, Isabelle, 2012. "Firms, Destinations, and Aggregate Fluctuations," CEPR Discussion Papers 9168, C.E.P.R. Discussion Papers.
  2. Markus Leibrecht & Johann Scharler, 2012. "Government Size and Business Cycle Volatility; How Important Are Credit Constraints?," Working Paper Series in Economics 237, University of Lüneburg, Institute of Economics.
  3. Volker Ziemann, 2013. "Do Structural Policies Affect Macroeconomic Stability?," OECD Economics Department Working Papers 1075, OECD Publishing.

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