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Diverging Trends in Aggregate and Firm Volatility

Diego Comin; Sunil Mulani1,2

1 Federal Reserve Bank of New York · 2 Analysis Group (United States)

The Review of Economics and Statistics 2006

This note documents the diverging trends in volatility of the growth rate of sales at the aggregate and firm levels. We establish that the upward trend in firm volatility is not simply driven by a compositional bias in the sample studied.We argue that this new fact brings into question the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the diverging trends at the micro and macro levels, a common explanation is likely. We conclude by describing one such theory.

DOI
10.1162/rest.88.2.374
Volume
88 (2)
Pages
374-383
Language
en
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