Productivity Growth and Stock Returns: Firm- and Aggregate-Level Analyses

Hyunbae Chun, Jung-Wook Kim and Randall Morck

No 19462, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Technological innovation is not a blessing for all firms, or for investors holding the market. In the late 20th century US, individual firms' stock returns correlate positively with their own productivity growth, yet the market return correlates negatively with aggregate productivity growth, yet. This seeming fallacy of composition reflects Schumpeterian creative destruction: a few technology winners' stocks rise with their rising productivity while many technology losers' stocks fall with their declining productivity. Thus, most individual firms' stock returns correlate negatively with aggregate productivity growth. Analogous reasoning explains prior findings that the market return correlates negatively with aggregate earnings.

JEL-codes: G14 G31 O33 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-cfn and nep-eff
Note: CF
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Published as Hyunbae Chun & Jung-Wook Kim & Randall Morck, 2016. "Productivity growth and stock returns: firm- and aggregate-level analyses," Applied Economics, Taylor & Francis Journals, vol. 48(38), pages 3644-3664, August.

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