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Firm Volatility in Granual Networks

Stijn Van Nieuwerburgh, Hanno Lustig, Bryan Kelly and Bernard Herskovic

No 12284, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Firm volatilities co-move strongly over time, and their common factor is the dispersion of the economy-wide firm size distribution. In the cross section, smaller firms and firms with a more concentrated customer base display higher volatility. Network effects are essential to explaining the joint evolution of the empirical firm size and firm volatility distributions. We propose and estimate a simple network model of firm volatility in which shocks to customers influence their suppliers. Larger suppliers have more customers and the strength of a customer-supplier link depends on the size of the customer. The model produces distributions of firm volatility, size, and customer concentration that are consistent with the data.

Keywords: Firm volatility; Networks; Firm size distribution; Aggregate volatility; Granularity (search for similar items in EconPapers)
JEL-codes: E20 E3 G1 L14 L25 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-bec, nep-mac and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Firm Volatility in Granular Networks (2020) Downloads
Working Paper: Firm Volatility in Granular Networks (2014) Downloads
Working Paper: Firm Volatility in Granular Networks (2013) Downloads
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