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Patterns of Comovement: The Role of Information Technology in the U.S. Economy

  • Hyunbae Chun
  • Jung-Wook Kim
  • Jason Lee
  • Randall Morck

Firm-specific variation in stock returns and fundamental performance measures is significantly higher in industries that have a history of more investment in information technology (IT). We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Thus, economy-level volatility can fall while firm-level volatility rises because firm-specific volatility cancels out in the aggregate. Our results are consistent with rising firm-specific variation in US stocks reflecting a rising pace of creative destruction; and with greater firm-specific variation in richer and faster growing countries reflecting more intensive creative destruction in those economies, though other explanations are probably valid as well.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10937.

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Date of creation: Nov 2004
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Handle: RePEc:nbr:nberwo:10937
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