Patterns of Comovement: The Role of Information Technology in the U.S. Economy / Hyunbae Chun, Jung-Wook Kim, Jason Lee, Randall Morck.

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Chun, Hyunbae

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w10937.Publication details: Cambridge, Mass. National Bureau of Economic Research 2004.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Firm-specific variation in stock returns and fundamental performance measures is significantly higher in industries that have a history of more investment in information technology (IT). We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Thus, economy-level volatility can fall while firm-level volatility rises because firm-specific volatility cancels out in the aggregate. Our results are consistent with rising firm-specific variation in US stocks reflecting a rising pace of creative destruction; and with greater firm-specific variation in richer and faster growing countries reflecting more intensive creative destruction in those economies, though other explanations are probably valid as well.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
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Previous	nber w10934 A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability /	nber w10935 Evaluation of Four Tax Reforms in the United States: Labor Supply and Welfare Effects for Single Mothers /	nber w10936 Do Tax Havens Flourish? /	nber w10937 Patterns of Comovement: The Role of Information Technology in the U.S. Economy /	nber w10938 Lost Decade in Translation: Did the US Learn from Japan's Post-Bubble Mistakes? /	nber w10939 FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment /	nber w1094 Some Aspects of the Taxation of Capital Gains /	Next

November 2004.

Firm-specific variation in stock returns and fundamental performance measures is significantly higher in industries that have a history of more investment in information technology (IT). We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Thus, economy-level volatility can fall while firm-level volatility rises because firm-specific volatility cancels out in the aggregate. Our results are consistent with rising firm-specific variation in US stocks reflecting a rising pace of creative destruction; and with greater firm-specific variation in richer and faster growing countries reflecting more intensive creative destruction in those economies, though other explanations are probably valid as well.