Review of Finance 2026

Sectoral comovement and conglomerate networks

Kenneth R. Ahern¹; Lei Kong²; Xinyan Yan³

¹ Marshall School of Business, and National Bureau of Economic Research (NBER) University of Southern California, , 701 Exposition Blvd., Ste. 231, Los Angeles, CA, 90089 · ² Culverhouse College of Business University of Alabama, , Tuscaloosa, AL, 35487, Box 870224 · ³ Muma College of Business University of South Florida, , FL, 33620, Tampa

Abstract

We study the influence of multi-sector conglomerate firms on sectoral comovement. Using an innovative network model of firms and industries, we derive a novel measure of the co-concentration of industries in which two industries are more co-concentrated if they share greater exposure to the same conglomerate firms. Using time-series, cross-sectional, and longitudinal tests on establishment-level data from nearly all US firms over 1991 to 2019, we find that industries with higher co-concentration exhibit stronger comovement in employment, sales, and asset growth. Controlling for alternative explanations, a one-standard deviation increase in co-concentration corresponds to a 0.32-standard deviation increase in the comovement of employment growth. In variance-covariance decompositions, we find that firm-specific shocks explain nearly half of aggregate volatility and industry comovement and that conglomerates play a significant role in sectoral comovement. Our framework helps explain how idiosyncratic, firm-level shocks contribute to aggregate fluctuations and influence business cycles.

DOI

10.1093/rof/rfag024

Language

en

Sources

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