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Varying Heterogeneity among U.S. Firms: Facts and Implications

  • Hyunbae Chun

    (Sogang University)

  • Jung-Wook Kim

    (Seoul National University)

  • Randall Morck

    (University of Albert)

U.S. firms' stock return volatility rose fivefold from 1971 through 2000 and then reverted to near 1971 levels by 2006. This was driven mainly by a rise and fall in the firm-specific, rather than systematic, component of volatility. Firm-level total factor productivity growth volatility exhibited a similar pattern. We hypothesize that firm heterogeneity, reflected in firm-specific volatility, rises as a new general purpose technology (GPT) propagates across the economy and then ebbs once the GPT is widespread. Measuring GPT adoption by information technology capital intensity, we find robust cross-industry empirical evidence supporting the hypothesis. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 93 (2011)
Issue (Month): 3 (August)
Pages: 1034-1052

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Handle: RePEc:tpr:restat:v:93:y:2011:i:3:p:1034-1052
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