Patterns of Comovement: The Role of Information Technology in the U.S. Economy
Hyunbae Chun,
Jung-Wook Kim,
Jason Lee and
Randall Morck
No 10937, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
Firm-specific variation in stock returns and fundamental performance measures is significantly higher in industries that have a history of more investment in information technology (IT). We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Thus, economy-level volatility can fall while firm-level volatility rises because firm-specific volatility cancels out in the aggregate. Our results are consistent with rising firm-specific variation in US stocks reflecting a rising pace of creative destruction; and with greater firm-specific variation in richer and faster growing countries reflecting more intensive creative destruction in those economies, though other explanations are probably valid as well.
JEL-codes: E3 G0 O3 O4 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-fin
Note: CH PR
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