Cyclical changes in firm volatility

Emmanuel De Veirman and Andrew Levin ()

Working Papers from DNB

Abstract: We estimate changes in firm-specific volatility in sales and earnings growth of US firms. We do so using an approach which better captures firm-specific volatility than commonly used dispersion measures do. Our results do not lend strong support to the common view that firm-specific volatility is counter-cyclical. The role of firmspecific volatility in explaining aggregate fluctuations is empirically very limited. This is evidence against the implication of irreversibility and financial accelerator theories that increases in firm-specific volatility cause macroeconomic downturns. Our measure also provides evidence on trends in firm volatility. Earlier findings of a trend increase in the volatility of publicly traded firms are completely overturned when we control for changes in sample composition. At the firm level, the 2007-2009 recession did not end the Great Moderation.

Keywords: Firm-Level Volatility; firm-specific shocks; business cycles (search for similar items in EconPapers)
JEL-codes: C32 C33 D22 E32 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Cyclical Changes in Firm Volatility (2011)
Working Paper: Cyclical changes in firm volatility (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:408

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