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Macro Shocks and Firm-Level Response Heterogeneity

Author

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  • Davis, Steven
  • Hansen, Stephen
  • Seminario-Amez, Cristhian

Abstract

Macro shocks produce high dispersion in firm-level equity returns, sales growth, and other outcomes. We show that this dispersion reflects observable differences in business characteristics. To do so, we combine firm-level returns on stock market ``jump" days with text about business risks in prior 10-K filings to construct firm-specific shock exposures. Our exposure measures explain firm-level abnormal returns through interpretable variation in language. They also explain most of the increased dispersion in firm-level revenue growth after major shocks and much of the dispersion in employment growth, investment rates, and earnings surprises. Our evidence yields a novel interpretation for countercyclical dispersion, highlighting the key role of heterogeneous business characteristics in macro shock transmission.

Suggested Citation

  • Davis, Steven & Hansen, Stephen & Seminario-Amez, Cristhian, 2025. "Macro Shocks and Firm-Level Response Heterogeneity," CEPR Discussion Papers 20358, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20358
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    File URL: https://cepr.org/publications/DP20358
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    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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