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Cross-sectoral variation in firm-level idiosyncratic risk

  • Rui Castro
  • Gian Luca Clementi
  • Yoonsoo Lee

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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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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  12. Yongsung Chang & Jay H. Hong, 2005. "Do technological improvements in the manufacturing sector raise or lower employment?," Working Paper 05-02, Federal Reserve Bank of Richmond.
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  15. Malkiel, Burton & Campbell, John & Lettau, Martin & Xu, Yexiao, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Scholarly Articles 3128707, Harvard University Department of Economics.
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  17. Timothy Dunne & John Haltiwanger & Kenneth R. Troske, 1996. "Technology and Jobs: Secular Changes and Cyclical Dynamics," NBER Working Papers 5656, National Bureau of Economic Research, Inc.
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  28. repec:ste:nystbu:05-20 is not listed on IDEAS
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  30. Rui Castro & Gian Luca Clementi & Glenn MacDonald, 2004. "Investor Protection, Optimal Incentives, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 1131-1175.
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