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Cross-sectoral variation in firm-level idiosyncratic risk

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  • Rui Castro
  • Gian Luca Clementi
  • Yoonsoo Lee

Abstract

In this paper we use data from the U.S. Census Bureau’s Longitudinal Research Database in order to assess the extent of the cross-sectoral variation in firm-level idiosyncratic risk and shed light on its determinants. We find that firms producing investment goods exhibit greater volatility in sales and TFP growth than firms producing consumption goods. Our data suggests that this may be the case because winner–takes–all competition is more common for the former than for the latter.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0812.

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Date of creation: 2008
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Handle: RePEc:fip:fedcwp:0812

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Keywords: Manufacturing industries ; Research and development;

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References

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  1. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  2. Michelacci, Claudio & Schivardi, Fabiano, 2008. "Does Idiosyncratic Business Risk Matter?," CEPR Discussion Papers 6910, C.E.P.R. Discussion Papers.
  3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  4. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2007. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 107-180 National Bureau of Economic Research, Inc.
  5. Dunne, Timothy & Haltiwanger, John & Troske, Kenneth R., 1997. "Technology and jobs: secular changes and cyclical dynamics," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 107-178, June.
  6. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders and Product Cycles," NBER Working Papers 3201, National Bureau of Economic Research, Inc.
  7. CASTRO, Rui & CLEMENTI, Gian Luca & MACDONALD, Glenn, 2009. "Legal Institutions, Sectoral Heterogeneity, and Economic Development," Cahiers de recherche 2009-08, Universite de Montreal, Departement de sciences economiques.
  8. John Y. Campbell & Martin Lettau & Burton G. Malkiel & Yexiao Xu, 2000. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," NBER Working Papers 7590, National Bureau of Economic Research, Inc.
  9. Bils, Mark & Chang, Yongsung, 2000. "Understanding how price responds to costs and production," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 33-77, June.
  10. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  11. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  12. repec:ste:nystbu:05-20 is not listed on IDEAS
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Cited by:
  1. Kevin Donovan, 2011. "Risk, Farm Ownership, and International Productivity Differences," 2011 Meeting Papers 1088, Society for Economic Dynamics.
  2. Julian di Giovanni & Andrei A. Levchenko & Isabelle M�jean, . "Firms, Destinations, and Aggregate Fluctuations," Working Papers 630, Research Seminar in International Economics, University of Michigan.
  3. Pablo N D’Erasmo & Hernan J Moscoso-Boedo, 2011. "Intangibles and Endogenous Firm Volatility over the Business Cycle," Virginia Economics Online Papers 400, University of Virginia, Department of Economics.
  4. Markus Poschke & Alain Gabler, 2011. "Growth through Experimentation," 2011 Meeting Papers 643, Society for Economic Dynamics.
  5. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," Working Papers 11-15, Center for Economic Studies, U.S. Census Bureau.
  6. Emmanuel De Veirman & Andrew Levin, 2014. "Cyclical changes in firm volatility," DNB Working Papers 408, Netherlands Central Bank, Research Department.
  7. Decker, Ryan & D'Erasmo, Pablo & Moscoso Boedo, Herman J., 2014. "Market exposure and endogenous firm volatility over the business cycle," Working Papers 14-12, Federal Reserve Bank of Philadelphia.
  8. Hernan Moscoso Boedo & Pablo D'Erasmo, 2011. "Entrepreneurship and Endogenous Volatility," 2011 Meeting Papers 901, Society for Economic Dynamics.
  9. Alain Gabler & Markus Poschke, 2013. "Experimentation by Firms, Distortions, and Aggregate Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 26-38, January.

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