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Innovation and Idiosyncratic Risk

Mariana Mazzucato and Massimiliano Tancioni (massimiliano.tancioni@uniroma1.it)

No 81, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: The paper studies whether “idiosyncratic risk†, i.e. the degree to which firm and industry specific returns are more volatile than aggregate market returns, is higher in innovative industries which are characterized by more risk and uncertainty. Volatility is studied both at the industry level (for 34 different industries from 1974-2003) and at the firm level (for 5 industries with different levels of innovativeness: biotech, pharmaceuticals, computers, textile, agriculture). Findings are mixed. A relationship between innovation and volatility emerges most strongly with firm level data, when firm dimension is accounted for, and when time varying volatility is explicitly studied via GARCH analysis. The latter highlights the distinctive behavior of returns during the course of the industry life-cycle.

Keywords: idiosyncratic risk; volatility; innovation; industry life cycle (search for similar items in EconPapers)
JEL-codes: G12 L11 (search for similar items in EconPapers)
Date: 2005-11-11
New Economics Papers: this item is included in nep-fin, nep-ino and nep-tid
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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http://repec.org/sce2005/up.18262.1106224102.pdf (application/pdf)

Related works:
Working Paper: Innovation and Idiosyncratic Risk: an Industry & Firm Level Analysis (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf5:81

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