Firm Volatility in Granular Networks
Firm volatilities co-move strongly over time, and their common factor is the dispersion of the economy-wide firm size distribution. In the cross section, smaller firms and firms with a more concentrated customer base display higher volatility. Network effects are essential to explaining the joint evolution of the empirical firm size and firm volatility distributions. We propose and estimate a simple network model of firm volatility in which shocks to customers influence their suppliers. Larger suppliers have more customers and customer-supplier links depend on customers size. The model produces distributions of firm volatility, size, and customer concentration consistent with the data.
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Copy CitationBernard Herskovic, Bryan Kelly, Hanno Lustig, and Stijn Van Nieuwerburgh, "Firm Volatility in Granular Networks," NBER Working Paper 19466 (2013), https://doi.org/10.3386/w19466.Download Citation
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Published Versions
Bernard Herskovic & Bryan Kelly & Hanno Lustig & Stijn Van Nieuwerburgh, 2020. "Firm Volatility in Granular Networks," Journal of Political Economy, vol 128(11), pages 4097-4162.
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