Firm Volatility in Granular Networks

By Bernard Herskovic, Bryan T. Kelly, Hanno Lustig, Stijn Van Nieuwerburgh. Journal of Political Economy, 2013

150 citations recorded by the source corpus.

Firm volatilities comove 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.

Subfields: Economics and Econometrics, Tourism, Leisure and Hospitality Management

View Paper: https://www.semanticscholar.org/paper/c4b888c4ba7de8cc680aec2b41a32b7fe39edcc6

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In Economics and Econometrics

Citations in the corpus

Production Networks: A Primer (2019, background): “Some recent examples include Herskovic et al. (2017), Herskovic (2018), and Gofman, Segal, and Wu (2018).”