Firm Volatility in Granular Networks

Stijn Van Nieuwerburgh, Hanno Lustig and Bryan Kelly
Additional contact information
Hanno Lustig: Anderson School of Business
Bryan Kelly: University of Chicago

No 253, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We propose a network model of firm volatility in which the customers' growth rate shocks influence the growth rates of their suppliers, larger suppliers have more customers, and the strength of a customer-supplier link depends on the size of the customer firm. Even though all shocks are i.i.d., the network model produces firm-level volatility and size distribution dynamics that are consistent with the data. In the cross section, larger firms and firms with less concentrated customer networks display lower volatility. Over time, the volatilities of all firms co-move strongly, and their common factor is concentration of the economy-wide firm size distribution. Network effects are essential to explaining the joint evolution of the empirical firm size and firm volatility distributions.

Date: 2014
New Economics Papers: this item is included in nep-bec, nep-dge, nep-net and nep-sbm
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Related works:
Journal Article: Firm Volatility in Granular Networks (2020)
Working Paper: Firm Volatility in Granual Networks (2017)
Working Paper: Firm Volatility in Granular Networks (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:253

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