Creative Destruction, Stock Return Volatility, and the Number of Listed Firms

Söhnke Bartram, Gregory W. Brown and Rene M. Stulz
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Gregory W. Brown: U of North Carolina at Chapel Hill
Rene M. Stulz: Ohio State U and ECGI

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Average idiosyncratic volatility and firm idiosyncratic volatility increase with the number of listed firms. Average industry idiosyncratic volatility increases with the number of listed firms in the industry. We explain the relation between idiosyncratic volatility and the number of listed firms through Schumpeterian creative destruction. We show that Schumpeterian creative destruction increases as the number of listed firms increases. However, there is no consistent evidence of an incremental effect of the number of non-listed firms on idiosyncratic volatility either in the aggregate or at the industry level, suggesting that listed firms play a unique role in the dynamism of the economy.

JEL-codes: G10 G11 G12 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-bec and nep-sbm
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Working Paper: Creative Destruction, Stock Return Volatility, and the Number of Listed Firms (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2024-09

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