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Intangibles and Endogenous Firm Volatility over the Business Cycle

  • Hernan Moscoso Boedo

    (University of Virginia)

  • Pablo D'Erasmo

    (University of Maryland)

This is a theory of endogenous volatility over the business cycle based on firm-level intangible expenditures. We propose a firm dynamics model with endogenous market participation. Firms that incur higher intangible expenses are able to serve more markets and diversify market-specific demand risk. The model is driven only by TFP shocks and captures the business cycle properties of firm-level volatility and intangibles expenditures. We empirically document that firm-level volatility is counter-cyclical and that intangible expenses are pro-cyclical. Consistent with our model, using data from the Kauffman Firm Survey and Compustat, we find that firm-level idiosyncratic volatility is negatively correlated with intangible expenditures.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 97.

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Date of creation: 2013
Date of revision:
Handle: RePEc:red:sed013:97
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Web page: http://www.EconomicDynamics.org/society.htmEmail:


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  1. CASTRO, Rui & CLEMENTI, Gian Luca & LEE, Yoonsoo, 2010. "Cross–Sectoral Variation in Firm–Level Idiosyncratic Risk," Cahiers de recherche 2010-07, Universite de Montreal, Departement de sciences economiques.
  2. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2011. "Does Management Matter? Evidence from India," NBER Working Papers 16658, National Bureau of Economic Research, Inc.
  3. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  4. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Working Papers 12354, National Bureau of Economic Research, Inc.
  5. repec:ste:nystbu:05-20 is not listed on IDEAS
  6. Bronwyn H. Hall, 1990. "The Manufacturing Sector Master File: 1959-1987," NBER Working Papers 3366, National Bureau of Economic Research, Inc.
  7. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," Working Papers 11-15, Center for Economic Studies, U.S. Census Bureau.
  8. CASTRO, Rui & CLEMENTI, Gian Luca & MACDONALD, Glenn, 2009. "Legal Institutions, Sectoral Heterogeneity, and Economic Development," Cahiers de recherche 2009-08, Universite de Montreal, Departement de sciences economiques.
  9. Costas Arkolakis, 2010. "Market Penetration Costs and the New Consumers Margin in International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1151 - 1199.
  10. John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
  11. Ruediger Bachmann & Giuseppe Moscarini, 2011. "Business Cycles and Endogenous Uncertainty," 2011 Meeting Papers 36, Society for Economic Dynamics.
  12. Ayse Imrohoroglu & Selale Tuzel, 2011. "Firm Level Productivity, Risk, and Return," 2011 Meeting Papers 21, Society for Economic Dynamics.
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