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Macroeconomic fluctuations and the firms' rate of growth distribution: evidence from UK and US quoted companies

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Emiliano Santoro ()

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Abstract

We fit the asymmetric Subbotin distribution introduced by Bottazzi and Secchi (2003) on UK and US data on quoted companies, in order to detect sources of asymmetries in the transmission of aggregate shocks, and cyclical patterns of higher moments of the firms’ rate of growth distribution over the business cycle. We support the evidence provided by Higson et al. (2002, 2004) of a negative correlation between the rate of growth of GDP and the standard deviation and skewness of the distribu- tion. Kurtosis exhibits a procyclical pattern. Furthermore, we provide an explanation of the emergence of these stylised facts based on the evidence that the left tail of the distribution is more responsive to macroeconomic fluctuations than its right counterpart. The evidence points to financial factors as one of the main drivers of the observed pattern.

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Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0606.

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Date of creation: 2006
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Handle: RePEc:trn:utwpde:0606

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Related research
Keywords: Subbotin Distribution Corporate Growth Business Cycle Financial Fragility

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Find related papers by JEL classification:
C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Econometric and Statistical Methods; Specific Distributions
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
G30 - Financial Economics - - Corporate Finance and Governance - - - General

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  9. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June. [Downloadable!] (restricted)
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  14. Bottazzi, Giulio & Secchi, Angelo, 2003. "Why are distributions of firm growth rates tent-shaped?," Economics Letters, Elsevier, vol. 80(3), pages 415-420, September. [Downloadable!] (restricted)
  15. Higson, C. & Holly, S. & Kattuman, P. & S. Platis, 2001. "The Business Cycle, Macroeconomic Shocks and the Cross Section: The Growth of UK Quoted Companies," Cambridge Working Papers in Economics 0114, Faculty of Economics, University of Cambridge. [Downloadable!]
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